Author: Helen Thomas

February 26, 2014

In a sign of some progress in its turnaround efforts, J.C. Penney reported a net profit of $35 million for the fourth quarter ended February 1, compared to a loss of $552 million a year ago.  Excluding a tax benefit and other items, Penney had a loss of $206 million for the quarter.

Looking forward, the company expects same store sales to increase approximately 3% to 5% for the first quarter and to increase mid-single digits for the full year 2014.

Net sales for the quarter fell 2.6% to $3.78 billion from $4.88 billion in the year ago quarter, which included an additional 53rd week.  Analysts had expected $3.85 billion.

Same-store sales rose 2% for the quarter, with holiday sales up 3%.  Online sales were $381 million for the quarter, up 26.3% versus the same period last year, excluding the 53rd week.

The company’s top performing merchandising divisions were home, men’s apparel, women’s accessories and Sephora.

“J.C. Penney achieved what it set out do to on a number of important fronts in 2013,” said CEO Myron Ullman.  “We stabilized our business, both financially and operationally, and restored our process disciplines, promotions, inventory levels and focus on the customer.  As a result, we generated positive comparable store sales in the fourth quarter and ended the year with more than $2 billion in total available liquidity.”

For the full year, the company reported an operating loss of $1.42 billion, which includes $215 million of restructuring and management transition charges.

Ullman said the retailer’s turnaround is gaining momentum.  “With the most challenging and expensive parts of the turnaround behind us, we will focus on improving gross margin, managing expense and steadily growing our sales in 2014.  Our strategic plan seeks to enhance performance across all of the key drivers of our business: merchandising, marketing, store experience, jcp.com, our teams, and our operations.  The goal is to deliver consistently improving financial results, and to restore J.C. Penney as a leader in American retail.”

Source: Retailing Today

February 26, 2014

Target continues to cope with the fallout of a data breach, which, as expected, hurt the company’s fourth quarter results.  The company incurred $61 million in expenses related to the breach during the quarter, but was able to bring the total impact to $17 million after applying a $44 million insurance payment.

But the retailer added that it is not only unable to estimate future expenses related to the data breach but also warned that those costs may adversely affect operations results in the first quarter and full year 2014 and future periods.

Expenses may include payments associated with potential claims by the payment card networks for alleged counterfeit fraud losses and non-ordinary course operating expenses (such as card re-issuance costs), REDcard fraud and card re-issuance expense, payments associated with civil litigation, governmental investigations and enforcement proceedings, expenses for legal, investigative and consulting fees and incremental expenses and capital investments for remediation activities.

“For more than 50 years Target has succeeded by focusing on our guests,” said chairman, president and CEO Gregg Steinhafel.  “During the first half of the fourth quarter, our guest-focused holiday merchandising and marketing plans drove better-than-expected sales. However, results softened meaningfully following our December announcement of a data breach.  As we plan for the new fiscal year, we will continue to work tirelessly to win back the confidence of our guests and deliver irresistible merchandise and offers, and we are encouraged that sales trends have improved in recent weeks.”

Net earnings dropped to $520 million from $961 million in the prior year period.  Sales decreased 6.6% to $20.9 billion from $44.4 billion last year, reflecting the impace of an additional accounting week in 2012 as well as a 2.5% decrease in comparable-store sales, partially offset by the contribution of new stores.

Target operates 1,917 stores: 1,793 in the United States and 124 in Canada.

Source: Retailing Today

February 25, 2014

Since Office Depot completed its merger transaction with Office Max November 5, 2013, the company has been aggressively executing its integration plan.  The company’s fourth quarter results for the period ended December 28, 2013 include OfficeMax’s operations, which generated $939 million of sales.

Chairman and CEO Roland Smith said that the company is focused on a number of key priorities, which include creating a lean organization with clear roles and accountabilities as well as defining its vision, mission and long-term global growth strategy.  Smith anticipates that the company’s comprehensive reorganization will be completed by the end of the month.

“For 2014, we are committed to delivering not less than $140 million of adjusted operating income,” he added.

Total sales for the quarter increased 33% to $3.5 billion compared to the prior year quarter.  The company also reported an operating loss of $118 million for the quarter compared to operating income of $5 million in the prior year quarter, and a net loss attributable to common stockholders of $144 million, or $0.34 per share, compared to a net loss of $17 million, or $0.06 per diluted share in the prior year quarter.  The reported results include merger-related expenses, asset impairment and other charges.

Following the merger with Office Max, divisional reporting was aligned to the three divisions historically utilized by Office Depot: North American Retail, North American Business Solutions, and International.  The former OfficeMax U.S. Retail business is included in North American Retail, the former Office Max U.S. Contract and Canada businesses are included in Business Solutions and the former Office Max businesses in Australia, New Zealand and Mexico are included in International.

North American Retail Division sales in the quarter increased 31% to $1.4 billion compared to the prior year quarter, primarily reflecting $384 million of sales from the OfficeMax stub period, from the merger closing date to December 28.  Same-store sales decreased 4% primarily due to lower average order values and lower transaction counts, resulting from decreased store traffic.

Office Depot ended 2013 with a total of 1,912 retail stores in the North American Retail Division, made up of 1,089 Office Depot branded locations and 823 OfficeMax branded locations.  During the fourth quarter of 2013, the company closed 16 Office Depot stores and seven OfficeMax stores, and opened one store under each brand.

Business Solutions Division sales increased 54% to $1.2 billion in the quarter compared to the prior year period, primarily reflecting $422 million of sales from the OfficeMax stub period.

International Division sales increased 15% to $911 million in the quarter – an increase of 12% on a constant currency basis – compared to the prior year period, including $133 million of sales from the OfficeMax stub period.

Source: Retailing Today

February 27, 2014

Weather Trends International expects March 2014 to trend similar in temperature to last year and below normal for the U.S. as a whole.  The month starts out with cold, possibly record-breaking in the North, along with some potentially snowy and/or icy weather as a storm system moves through.  Colder trends linger into the second week of the month, but toward St. Patrick’s day, temperatures look to take a turn toward trending warmer than last year.  Unfortunately, following a lousy March for spring categories in 2013, this year will be similar temperature-wise across much of the North with some improvement arriving toward the mid to latter half of the month.  In the West, temperatures will trend cooler than last year but still near or above normal.  Like last year, this year is expected to be snowier than normal with much of the East seeing similar amounts to last year and the Mountain West will see a significant boost in snowfall, especially in weeks two, four and five.  Overall, spring categories, like apparel and sun care, will start the month off very weak, but some improvement will arrive around mid-March.  Demand for spring categories will be generally flat to last year, except in the Southeast where warmer temperature trends are expected.

Source: Retailing Today, Weather Trends International

February 25, 2014

The Conference Board Consumer Confidence Index, which had increased in January, fell moderately in February.  The Index now stands at 78.1, down from 79.4 in January.  The decline was driven by the Expectations Index, which dropped to 75.7 from 80.8.  The Present Situation Index, by contrast, climbed from 77.3 to 81.7.

“Consumer confidence declined moderately in February, on concern over the short-term outlook for business conditions, jobs, and earnings,” said Lynn Franco, Director of Economic Indicators at The Conference Board.  “While expectations have fluctuated over recent months, current conditions have continued to trend upward and the Present Situation Index is now at its highest level in almost six years (April 2008, 81.9).  This suggests that consumers believe the economy has improved, but they do not foresee it gaining considerable momentum in the months ahead.”

Consumers’ appraisal of current conditions improved for the fourth consecutive month.  Those claiming business conditions are “good” increased to 21.5 percent from 20.8 percent, while those claiming business conditions are “bad” declined to 22.6 percent from 23.4 percent.  Consumers’ assessment of the labor market also improved.  Those claiming jobs are “plentiful” increased to 13.9 percent from 12.5 percent, while those saying jobs are “hard to get” decreased slightly to 32.5 percent from 32.7 percent.

Consumers’ expectations, which had been improving over the past two months, retreated in February.  The percentage of consumers expecting business conditions to improve over the next six months decreased to 16.3 percent from 17.0 percent, while those anticipating business conditions to worsen increased to 13.3 percent from 12.2 percent.  Consumers’ outlook for the labor market was also more pessimistic.  Those expecting more jobs in the months ahead declined to 13.3 percent from 15.1 percent, while those anticipating fewer jobs increased to 20.6 percent from 19.0 percent.  The proportion of consumers expecting their incomes to increase declined from 16.6 percent to 15.4 percent, but those anticipating a decrease in their incomes also declined, from 13.9 percent to 13.1 percent.

Source: The Conference Board

February 25, 2014

Despite an 11% profit increase in the fourth quarter, sales at Macy’s missed forecasts as ongoing winter storms hurt the retailer’s results in January.

Macy’s reported net income of $811 million during the fourth quarter, up 5% from $730 million in the same period a year earlier.  Sales dropped 1.6% to $9.2 billion from $9.35 billion.  Analysts had expected a more modest decline to about $9.28 billion.  Same-store sales grew 1.4% for the quarter, less than the 2.5% projected by Wall Street.

During the full fiscal year, net income rose 19% to about $1.45 biooion.  Net sales totaled $27.93 million, up 0.9% from $27.69 million.  Same-store sales increased 1.9%.

Although same-store sales in November and December 2013 rose 3.6% due to strong holiday performance, a worse-than-expected post-holiday slump in January 2014 led to Macy’s net sales loss for the quarter.  Macy’s said severe weather resulted in 244 Macy’s and Bloomingdale’s stores across the country being shut down at some point during the month.

Macy’s credited part of its net income growth to its ability to place more of the 2,500 employees who were laid off in January 2014 into new jobs than it had expected.  In addition, Macy’s said its core business strategies, My Macy’s localization, omnichannel integrationand magic selling, which are known by the acronym of M.O.M, helped drive profitability and will continue to do so in the future.

“As has been the case since we began implementing these strategies in the 2008/2009 period, our competitive advantage is in the unique combination of localization, omnichannel and enhanced customer engagement,” said president, chairman and CEO Terry J. Lundrgen.  “Customers are able to shop for and buy the products that they want and prefer in our stores, via mobile devices and on computers in a shopping environment that delivers outstanding value and is supported with great service.”

The company is reiterating its annual sales and earning guidance, initially provided January 8.  Same-store sales growth in fiscal 2014 is expected in the range of 2.5-3%.  Earnings of $4.40 to $.50 per share are expected in 2014.

The company also announced plans for new Macy’s stores in Sarasota, Florida; Las Vegas; and the Bronx, New York, in fiscal 2014.  A new Bloomingdale’s will open in Palo Alto, California, to replace an older store in the same shopping center.

Source: Retailing Today

February 26, 2014

Severe winter weather was no match for Lowe’s in the fourth quarter.  The company reported sales of $11.7 billion, up 5.6% from the same quarter last year, as comps increased 3.9%.  The company also posted fourth-quarter net earnings of $306 million, up 6.3%.

“During the quarter, we delivered solid performance in core home improvement categories, balancing softer sales of seasonal gifts and holiday decorations,” said CEO Robert Niblock.  “When extreme winter weather arrived late in the quarter, our distribution network responded quickly and efficiently to move product where it was most needed.”

For the full year, sales reached $53.4 billion, a 5.7% increase over 2012 sales.  Comps for the year finished at 4.8%, as net income surged 16.7% to $2.3 billion.

Looking ahead, Lowe’s expects total sales for fiscal 2014 to increase about 5%, and comparable store sales to increase about 4%.  The company expects to open about 15 home improvement stores and five Orchard Supply hardware stores.

Niblock added that he was pleased with the progress Lowe’s made during 2013 and that the retailer continues to “transform.”

As of January 31, Lowe’s operated 1,832 stores in the U.S., Canada and Mexico.

Source: Retailing Today

February 25, 2014

Although the Home Depot’s overall sales missed analysts’ expectations, the retailer said the calendar shift, which resulted in one fewer week in the fourth quarter compared to the prior year quarter, affected its results.

The world’s largest home improvement retailer reported fourth quarter total sales of $17.7 billion, down 3% from the same quarter last year, which benefited from an extra week in the calendar.  On a 13 week basis, the company’s sales actually increased 3.9%.

Comp-store sales in the quarter increased 4.4% company-wide and 4.9% in the United States.  Net earnings were $1.01 billion, down slightly from $1.02 billion a year ago.

For the full year, the company pointed to strong performances across the board.  Net sales increased 5.4% to $78.8 billion – excluding the 53rd week from the prior year, the increase was 7.2%.  Comp-store sales increased 6.8% for the company, and increased 7.5% for the U.S.

“In 2013, we posted our strongest comp sales growth in 14 years as solid execution and the recovering housing market aided our performance,” said Frank Blake, CEO and chairman.

Looking ahead, the company expects sales growth of about 4.8% in 2014, with comp-store sales growth of about 4.6%.  The company’s guidance also called for seven new stores.

Source: Retailing Today

February 24, 2014

Dillard’s CEO William T. Dillard II voiced disappointment in the retailer’s gross margin performance despite what he called a profitable fourth quarter.  Although comparable sales gew 2%, the retailer said lower-than-expected sales necessitated heavy markdowns.

The company reported a net income of $119.1 million for the quarter and fiscal 2014, a 26% decline from $161.4 million for the same period a year earlier.  Net sales in the fourth quarter declined 3% to $2.03 billion from $2.1 billion.  During the fiscal year, net income dropped about 4% to $323.7 million from $336 million, and net sales slightly declined to $6.53 billion from $6.59 billion.  Same-store sales rose 1%.

Looking ahead, Dillard’s plans to open two new stores in October 2014: a 200,000 sq. ft. location in The Shops at Summerlin in Las Vegas and a 180,000 sq. ft. location in The Mall at University Town Center in Sarasota, Florida.

Source: Retailing Today

February 25, 2014

Though the average size of new homes keeps getting bigger, there is more to this home buying trend than meets the eye, according to Census Bureau data presented by the National Association of Home Builders during the International Builders’ Show in Las Vegas.

“The average home size has continued to rise for the past four years, from 2,362 square feet in 2009 to 2,679 square feet in 2013,” said Rose Quint, NAHB assistant vice president for survey research.

The share of new homes with at least four bedrooms has also been on an upward trend, rising 34 percent in 2009 to 48 percent last year.  Meanwhile, the percent of homes with at least three full bathrooms has gone from 23 percent in 2010 to 35 percent in 2013, and the share of homes with three-plus garages has climbed from 16 percent in 2010 to 22 percent last year.

The upward trend also applies to the percentage of two-story single family homes started, with the share steadily rising from 51 percent in 2009 to 60 percent in 2013.

As homes get bigger, so does the average sales price, rising from $248,000 in 2009 to $318,000 in 2013.  To find out why homes are getting so big, you need to look at who is buying them.

“It requires a high credit score and a nice income to qualify for a mortgage,” said Quint, who noted that the spread between the average Experian credit score of all U.S. consumers and the average home borrower’s score has risen from 33 points in the early 2000s to 58 points in 2013.

The median income of new home buyers has steadily climbed from $91,768 in 2005 to $107,607 in 2011.

During the same period, the number of new home sales has dramatically declined, from 1.28 million to 306,000.

“There are not as many people who have the income that can qualify for a new home,” said Quint.

Source: National Association of Home Builders