Author: Helen Thomas

August 22, 2014

Although same-store sales at Gap were flat in the second quarter, the company reported a better-than-expected quarterly profit, buoyed by strong sales at Old Navy, and raised its full-year profit forecast as a result.

Net profit rose to $332 million in the quarter from $303 million a year ago.

Revenue increased 3% to $3.98 billion.  Online net sales increased 11% to $515 million, on top of last year’s 27% increase.  The company noted it continues to advance its successful omnichannel platform with the expansion of its reserve in store service to all U.S. Gap stores.  The company also launched its order-in-store pilot, with plans to roll out the service to select U.S. Gap, Banana Republic, Old Navy and Athleta stores later this year.

Gap also plans to expand its reach to India through 40 franchise-operated stores.  The retailer is partnering with Arvind Lifestyle Brand Limited, a subsidiary of Arvind Limited, which is one of India’s largest textile companies.

“India is an emerging, vibrant market and an important next step in our global expansion strategy,” said Steve Sunnucks, global president of Gap.

Source: Retailing Today

August 21, 2014

Describing second quarter earnings as “unacceptable,” Sears Holdings chairman and CEO Edward Lampert added that his company’s transformation is continuing and online sales are growing.

The company reported second quarter net loss of $573 million, compared with a loss of $194 million in the same quarter last year.  Revenues decreased $858 million to $8.0 billion for the quarter ended August 2, 2014.

“We are taking steps to address our performance on several levels,” Lampert said.  “This includes reducing costs as we evolve our business model, investing in our Shop Your Way and Integrated Retail customer initiatives, rationalizing our physical footprint and improving pricing and promotions.”

The revenue decrease included the separation of the Lands’ End business, which was completed in the first quarter of 2014 and accounted for $330 million of the decline.  The revenue decrease also included the effect of having fewer Kmart and Sears full-line stores in operation, which accounted for $256 million of the decline, as well as a decrease of $140 million at Sears Canada.

Sears also experienced a revenue decline in its Home Services business during the quarter, as well as a decline in delivery revenues.

Sears full-line stores experienced comparable-store sales growth of 0.1% for the quarter as compared with a decline of 0.8% in the second quarter of last year, despite the continuing impact of consumer electronics industry trends.

Kmart comparable-stores sales were down 1.7% for the quarter as compared with a 2.1% decline last year.

Sales to Shop Your Way members in Sears full-line and Kmart stores increased to 73% of eligible sales, up from 71% during the second quarter last year.  Online and multichannel sales grew 18% over the prior-year second quarter and 22% over the prior-year first half.

“We continue to evaluate our Sears Auto Center business, as well as our 51% interest in Sears Canada, including a potential sale of our interest of Sears Canada as a whole,” the company said.

Source: Retailing Today

August 20, 2014

Staples chairman and CEO Ron Sargent said that the company has more work to do to stabilize its retail business, following a 20% decline in net income to $81.88 million for the second quarter, from $102.53 million in the prior year.

Sargent added that the company will continue taking steps toward improving customer traffic, reduce expenses and close underperforming stores.

The company’s results included $101 million of pre-tax restructuring and other related charges primarily associated with the closure of 80 stores, along with its previously announced plan to close approximately 40 stores in North America during the second half.

Sales declined 2% to $5.22 billion – above analysts’ estimates.  Same-store sales at Staples North American stores decreased 5%.  E-commerce saw sales growth of 8%.

“We’re accelerating growth in our delivery businesses as customers turn to Staples for more products beyond office supplies,” said Sargent.

Staples forecast third-quarter adjusted earnings of 34 cents to 39 cents a share, excluding any potential impact on per-share earnings from restructuring and related activities.  The retailer plans to take a pretax charge of $40 million to $75 million in the third quarter stemming from restructuring.

Source: Retailing Today

August 15, 2014

Despite an increase of 1% in comparable store sales, Dillard’s CEO William T. Dillard II expressed disappointment in the company’s bottom line performance.

The company’s net sales for the 13 weeks ended August 2 were $1.475 billion, compared to net sales of $1.480 billion for the 13 weeks ended August 3, 2013.  Net sales include the operations of the company’s construction business, CDI Contractors.

Total merchandise sales (which exclude CDI) for the quarter were $1.461 billion, compared to net sales of $1.459 billion for the comparable period last year.  Total merchandise sales remained unchanged on a percentage basis for the quarter.

Sales trends were strongest in juniors’ and children’s apparel followed by men’s apparel and accessories.  Sales were weakest in the home and furniture category.  Sales trends were strongest in the Central region, followed by the Eastern and Western regions, respectively. “We are pleased with our inventory management during the quarter and with our ending inventory position,” Dillard said.

Gross margin from retail operations (which excludes CDI) declined 33 basis points of sales for the quarter compared to the proir year second quarter.  The decline resulted primarily from increased markdowns.  Consolidated gross margin for the quarter declined 20 basis points of sales comapred to the prior year second quarter.  Inventory decreased 2% at August 2 compared to August 3, 2013.

As of August 2, the company operated 278 Dillard’s locations and 18 clearance centers spanning 29 states and an e-commerce site.

Source: Retailing Today

August 21, 2014

The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.9 percent in July to 102.2, following a 0.6 percent increase in June, and a 0.6 percent increase in May.

“The LEI improved sharply in July, suggesting that the economy is gaining traction and growth and should continue at a strong pace for the remainder of the year,” said Ataman Ozyildirim, Economist at The Conference Board.  “Although housing has been one of the weakest components this year, the sharp gain in building permits helped boost the LEI in July.  Financial markets and labor market conditions have also supported recent gains, but business spending indicators remain soft and their contribution marginal.”

“The pace of economic activity remained reasonably strong in July,” said Ken Goldstein, Economist at The Conference Board.  “Although retail sales were a little disappointing, hiring and industrial activity improved.  July’s increase in the LEI, coupled with its accelerating growth trend, points to stronger economic growth over the coming months.”

The Conference Board Coincident Economic Index (CEI) for the U.S. increased 0.2 percent in July to 109.6, following a 0.3 percent increase in June, and a 0.2 percent increase in May.

The Conference Board Lagging Economic Index (LAG) for the U.S. increased 0.2 percent in July to 124.6, following a 0.5 percent increase in June, and a 0.4 percent increase in May.

Source: The Conference Board

August 21, 2014

Dollar Tree delivered its 26th consecutive quarter of positive comparable store sales growth in the second quarter, but profit declined 2.6% thanks to increased freight costs and investments in higher-value products.

Consolidated comparable store sales increased 4.5% on a constant currency basis.  Adjusted for the impact of Canadian currency fluctuations, the comparable store sales increase was 4.4%.  Consolidated net sales increased 9.5% to $2.03 billion from $1.85 billion in the prior year’s second quarter.

Gross profit in the quarter increased 7% to $694.1 million from $648.7 million in the prior year’s second quarter.

Net income, compared to the prior year’s second quarter, including acquisition-related costs, decreased approximately $3.2 million to $121.5 million, and diluted earnings per share increased by 5.4% to $0.59.  Excluding acquisition-related costs, net income increased approximately $1.4 million to $126.1 million and diluted earnings per share increased 8.9% to $0.61.

“I am very pleased with our second quarter results,” CEO Bob Sasser said.  “Expanded assortments of high-value product contributed to our strongest quarterly comparable store sales performance in two years.  Pet supplies, hardware, household products, food, electronics and party goods all performed well in the quarter.  Our 4.5% comp sales resulted from increases in both customer traffic and average ticket.  I am paticularly proud of our store associates.  Our store teams continue to execute at a high level as the company delivered its 26th consecutive quarter of positive comparable store sales growth.  In challenging macro environments, consumers are increasingly relying on Dollar Tree to be part of the solution in managing their family’s budget.  Our stores are well-stocked with incredible values and we are prepared for the fall selling season.”

The company opened 90 stores, expanded or relocated 20 stores and closed 4 stores during the quarter.  Retail selling square footage increased to 44.8 million sq. ft., a 6.8% increase compared to the prior year.

Looking ahead, the company estimates sales for the third quarter to range from $2.02 billion to $2.07 billion, based on low to mid-single digit positive comparable store sales.  Diluted earnings per share are estimated to range from $0.61 to $0.66, excluding acquisition-related costs.

Full-year 2014 sales are now estimated to range from $8.44 billion to $8.55 billion.  This estimate is based on a range of low to mid-single digit positive comparable store sales.  Diluted earnings per share, which includes $0.02 per share of second quarter acquisition-related costs, are expected to range from $2.94 to $3.06, excluding third and fourth quarter acquisition-related costs.

Dollar General bid $78.50 for Family Dollar Monday morning in a $9.7 billion deal that exceeds the $74.50 a share Dollar Tree offered for Family Dollar on July 28.  The deal would create a small format powerhouse with nearly 20,000 stores in 46 states and sales of more than $28 billion.  In a statement released this morning, Family Dollar’s board of directors has unanimously rejected the non-binding proposal made by Dollar General on the basis of antitrust regulatory considerations.  The Family Dollar board also unanimously reaffirmed its recommendation in support of the merger agreement with Dollar Tree.

Source: Retailing Today 

August 21, 2014

Family Dollar Stores rejected a $9 billion, all-cash takeover offer from Dollar General, pointing to antitrust concerns and reaffirming its support for its deal with smaller rival Dollar Tree.

Family Dollar’s agreement with Dollar Tree, reached late last month, is worth about $8.5 billion in cash and stock, or $74.50 a share.  Family Dollar shares fell slightly to $79.65 in recent remarket trading, still above Dollar General’s offer of $78.50, indicating investors expect the fight to drag on.

“Our board reviewed, with our advisers, all aspects of Dollar General’s proposal and unanimously concluded that it is not reasonably likely to be completed on the terms proposed,” Chairman and Chief Executive Howard R. Levine said.  “Accordingly, our board rejects Dollar General’s proposal and reaffirms its support for the pending merger with Dollar Tree.”

A representative from Dollar General wasn’t immediately available, while Dollar Tree declined to comment.

The battle over Family Dollar, the second-largest U.S. dollar chain, has come as so-called dollar stores have performed with relative strength compared to the rest of the retail sector, which has been consolidating as customer traffic declines and online competition grows.

Dollar General, the largest of the three dollar stores, had said it would divest 700 stores after a potential merger with Family Dollar to satisfy regulatory concerns.  A combination of Dollar General and Family Dollar would have about 20,000 stores in 46 states, with sales of more than $28 billion, Dollar General has said.

Dollar Tree is No. 3 in the market.

Investor Nelson Peltz’s Train Fund Management LP also cited antitrust worries while it offered support for Family Dollar’s deal with Dollar Tree.

“Given the significant antitrust issues involved with Dollar General’s proposal, we will not jeopardize the Dollar Tree deal for a transaction with Dollar General that has a high likelihood of not closing due to antitrust considerations,” Train co-founder and partner Ed Garden said in Family Dollar’s release Thursday.  “We remain fully committed to the Dollar Tree transaction.”

Combined, Train and Mr. Levine own 16% of Family Dollar’s shares.  Train itself had attempted to buy Family Dollar with a $7.75 billion offer the retailer rejected in 2011.  The firm has had a representative on the retailer’s board since 2001.

Source: The Wall Street Journal 

August 20, 2014

A day after Home Depot reported strong second-quarter results, it was Lowe’s turn to deliver strong quarterly earnings.

And the Mooresville, North Carolina-based retail giant did just that.  The company reported net earnings of $1.04 billion for the quarter ended August 1, marking a 10.4% increase over the second quarter last year.  Sales for the quarter were up 5.7% to $16.6 billion, as comparable-store sales were up 4.4%.

“We were able to recover most of the outdoor product sales missed in the first quarter due to unfavorable weather conditions,” said Robert Niblock, president and CEO.

For Lowe’s the expectation is that home improvement spending will continue to grow in concert with job and income growth.  The company’s forecast for earnings per share remains unchanged, but Lowe’s made a “modest reduction” to its sales outlook  for the year, based partly on year-to-date performance.  For the year, total sales are expected to increase about 4.5%, as comps are expected to increase about 3.5%.

The company operated 1,837 home improvement and hardware stores as of August 1, representing 200.8 million square feet of retail space.

Source: Retailing Today

August 14, 2014

Same store sales growth of 6% and e-commerce strength helped J.C. Penney dramatically reduce its second quarter operating loss and demonstrate growing momentum of its turnaround.

Sales at the operator of 1,060 stores increased to $2.8 billion from $2.66 billion and the 6% comp increase the company reported was against an easy prior year comparison when comps declined 11.5%.  Online sales through jcp.com were $249 million for the quarter, up 16.7% versus the same period last year.

The company reported an operating loss of $70 million that, while sizable, was dramatically less than a prior year loss of $395 million.  The company’s net loss of $172 million, or 56 cents a share, was also markedly better than the prior year loss of $586 million, or $2.66 a share.

“Our turnaround initiatives continue to produce improved financial results.  In the second quarter, we gained additional market share while significantly increasing gross margin in a highly competitive promotional environment,” said J.C. Penney CEO Mike Ullman.  “Our customers know they can count on J.C. Penney to deliver relevant stylish merchandise at a price that fits their budget.  With our unique assortment of powerful private brands, key national brands and exclusive attractions – all at prices customers can afford – we expect to continue driving profitable sales this back to school season.  As we approach the completion of our turnaround, we are focused on re-establishing J.C. Penney as the premier shopping destination for the moderate consumer.”

The company singled out women’s and men’s apparel and accessories, home and fine jewelry as its top performing businesses during the quarter.  Sephora inside J.C. Penney also continued its strong performance, according to the company.

Looking ahead, J.C. Penney said it expects third quarter comps to grow in the mid single digit range.

Source: Retailing Today

August 19, 2014

Fueled by strong single and multifamily growth, nationwide housing starts rose 15.7 percent to a seasonally adjusted annual rate of 1.093 million units in July, the highest level since November 2013, according to newly released figures from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

“A return to production levels over one million confirms that consumer confidence continues to improve,” said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Delaware.  “Propelled by a healthier economy, more and more people are feeling ready to buy a home.”

Single-family housing starts were up 8.3 percent to a seasonally adjusted annual rate of 656,000 units in July, while multifamily production jumped 28.9 percent to 437,000 units.

Regionally in July, combined single and multifamily housing production rose in the Northeast, South and West, with respective gains of 44 percent, 29 percent and 18.6 percent.  Total production fell by 24.8 percent in the Midwest from an unusually high June level.

“July’s increase in starts combined with rising builder sentiment proves that June’s production dip was more of an anomaly than a reversal of the market,” said NAHB Chief Economist David Crowe.  “We should continue to see a gradual, consistent recovery throughout the rest of the year.”

Issuance of building permits registered an 8.1 percent increase to a seasonally adjusted annual rate of 1.052 million units in July.  Multifamily permits rose 21.5 percent to 412,000 units while single-family permits increased by 0.9 percent to 640,000 units.

The Northeast, South and West registered overall permit gains of 18.8 percent, 9.6 percent and 7.2 percent, respectively, while the Midwest posted a 0.6 percent loss.

Source: National Association of Home Builders