Author: Helen Thomas

A fourth consecutive quarter of same store sales growth at Walmart’s U.S. business helped the company achieve a slightly better than expected profit performance.

Second quarter earnings grew 8.3% to $1.18, one cent better than the consensus estimate of analysts and at the top of the company’s forecast range of $1.13 to $1.18.  Total company sales increased 4.5% to $113.5 billion, and net income increased 5.7% to slightly more than $4 billion.  The key driver of the improved performance was continued strength of the Walmart U.S. business where same store sales increased 2.2%, within the company’s guidance range calling for an increase of 1% to 3%.

“I’m really pleased with the continued momentum we see in our Walmart U.S. stores, and this now marks three consecutive quarters of positive comp trafic and four quarters of positive comp sales,” said Wal-Mart Stores president and CEO Mike Duke.  “There’s such a clear focus among the leadership team to drive the strategy of broad assortment and price leadership.  We continue to win back customers and attract new ones.  We will not let up on our passion to reduce operating expenses so that we can invest in lower prices.  This is the promise that our customers expect from Walmart and what drives greater loyalty.”

Sales at U.S. stores grew 3.8% to $67.4 billion, while operating profits increased 5.3% to $5.25 billion.

“Customers are responding to our continued focus on providing the right assortment at everyday low prices,” said Walmart U.S. president and CEO Bill Simon.  “During the quarter, our average comp traffic increase was equal to serving an average of 80,000 additional customers every day of the 13-week period.”

“We believe that the improvements in our quality and overall merchandise offerings are key to driving these results,” said Sam’s Club president and CEO Rosalind Brewer.  “In fact, member engagement scores continue to achieve record levels.  We’re also investing in price to deliver greater value on top of these quality improvements.”

Internationally, sales increased 6.4% on a constant currency basis to $32 billion and operating profits increased 5.4% to nearly $1.5 billion.  A strengthening of the U.S. dollar had a major impact on the comparisons to the prior year.  On a constant currency basis sales would have increased by 7.2% to $32.3 billion and operating profits would have increased 11.9% to $1.6 billion.

“Every market delivered positive comps, and I’m pleased that our largest markets, the United Kingdom, Mexico and Canada, collectively delivered stable growth, solid margins and expense leverage, despite challenging environments,” said Walmart International president and CEO Doug McMillon.

Walmart increased by a penny and narrowed its full year profit forecast to a range of $4.83 to $4.93 from a prior range of $4.72 to $4.92.

Source: retailingtoday.com

Home Depot reported sales of $20.6 billion for the second quarter of 2012, a 1.7% increase from the second quarter of fiscal 2011.  Comparable sales for U.S. stores were positive 2.6%, and overall same-store sales for the second quarter were positive 2.1%.

Net earnings for the world’s largest home improvement retailer were $1.53 billion for the second quarter, which ended July 29.  This compares with net earnings of $1.36 billion in the same period a year ago, reflecting a 12.4% increase.

“As expected, second quarter sales reflected the pull forward of seasonal activity into the first quarter,” said Frank Blake, chairman and CEO.  “But we saw continued demand for core products and delivered second quarter earnings above our expectations.”

The Atlanta retailer expects fiscal 2012 sales will increase approximately 4.6% from the prior year on a 53 week basis.

At the end of the second quarter, Home Depot operated a total of 2,255 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces, Mexico and Canada.

Source:  retailingtoday.com

Retail sales advanced 0.8% in July, the first gain in four months, according to a report released by the Commerce Department.  Sales were fueled by strength from the automobile sector, electronics and appliance outlets, and department stores.

The bigger than expected increase followed a 0.7% decline in June that was weaker than first reported.  Bloomberg had forecast a 0.3% rise in July.  The results have buoyed feelings overall that the economy may be improving, albeit at a moderate pace.

“We’re looking for consumption to pick up,” Credit Agreicole CIB chief economist Michael Carey told Bloomberg.  “There was improved consumer confidence in July plus job gains that were a little better than expected, which is certainly constructive for the household outlook.”

Retail sales, which climbed the most since February, followed a quarter in which household spending grew at the slowest pace in a year.  Consumer purchases, about 70% of the economy, increased at a 1.5% annual rate from April to June.

All 13 major retail categories showed a gain last month, led by a 0.8% jump at auto dealers, a 0.9% rise at electronics and appliance outlets, and a 0.6% increase at department stores that was the most since September.

Spending increased 0.8% at clothing stores and 0.7% at general merchandise stores.  Health and personal care sales jumped 1.1%, the most since May 2011.

Industry data also showed that same-store sales at the more than 20 retailers tracked by Retail Metrics Inc. gained 4.4% in July, almost four times analysts’ estimates, after only a 0.3% rise in June.

Sales excluding automobiles and service stations advanced 0.9%, the most since January.

Source:  retailingtoday.com

Helped by hot weather and clearance sales, many retailers reported solid results in July, a month that can be slow leading up to the back to school shopping season.  Some of the strongest showings in the month were in the department store category, as all those reporting showed July gains.  

Macy’s led the pack with a 4.1% same-store rise in sales.  Total sales increased 5.1% to $1.7 billion over the four-week period.  “Despite some challenges from a sluggish macroeconomic environment and a temporary disruption of sales from the remodeling project at our Herald Square flagship store in New York City, the spring season met our expectations,” said Macy’s president and CEO Terry Lundgren.

Kohl’s reported a lesser 1.7% gain in same-store sales, with total sales up 3.4%.  “We are pleased with the improvement in July’s comparable store sales,” said Kevin Mansell, president and CEO.

Other department store July results include: Nordstrom same-store sales edged up 0.9%; Saks increased 3.5%; Bon-Ton Stores rose a slight 0.1%; and Stage Stores gained 5.3%, beating the 2.2% rise expected by Wall Street.

Source: retailingtoday.com

The Conference Board Consumer Confidence Index, which had declined in June, improved slightly in July.  The Index now stands at 65.9 (1985=100), up from 62.7 in June.  The Expectations Index improved to 79.1 from 73.4.  The Present Situation Index, however, decreased slightly to 46.2 from 46.6 a month ago.

Says Lynn Franco, Director of Economic Indicators at The Conference Board: “Despite this month’s improvement in confidence, the overall Index remains at historically low levels.  Consumers’ attitude regarding current conditions was little changed in July, but their short-term expectations, which had declined last month, bounced back.  However, while consumers expressed greater optimism about short-term business and employment prospects,they have grown more pessimistic about their earnings.  Given the current economic environment – in particular the weak labor market – consumer confidence is not likely to gain any significant momentum in the coming months.”

Consumers’ appraisal of current conditions eased in July.  Those claiming business conditions are “good” declined to 13.8 percent from 14.2 percent, while those saying business conditions are “bad” decreased to 34.2 percent from 35.9 percent.  Consumers’ assessment of the labor market was also mixed.  Those stating jobs are “hard to get” declined to 40.8 percent, while those claiming jobs are “plentiful” decreased to 7.8 percent from 8.3 percent.

On the other hand, consumers were generally more optimistic about the short-term outlook in July.  The percentage of consumers expecting business conditions to improve over the next six months rose to 18.9 percent from 16.0 percent, while those anticipating business conditions will worsen decreased to 14.6 percent from 15.8 percent.  Consumers’ outlook for the labor market was also more upeat in July.  Those expecting more jobs in the months ahead increased to 17.6 percent from 14.8 percent, while those anticipating fewer jobs edged down to 20.3 percent from 20.8 percent.  The proportion of consumers expecting an increase in their incomes, however, declined to 14.2 percent from 15.3 percent.

Source: The Conference Board

The National Retail Federation joined a coalition of manufacturers, shippers and transportation providers opposing new federal trucking regulations on drivers’ hours of service.

“The retail industry is at the crossroads of the supply chain, interconnecting manufacturers and suppliers with vendors and customers,” NRF president and CEO Matthew Shay said.  “It is the retail industry’s responsibility to get products to market and into consumers’ hands in a safe and timely manner.  It is a responsiblity that we hold dear.  Any new regulation that impedes that ability increases our transportation costs, increases consumer prices, and jeopardizes the fragile economic recovery.”

The joint brief challenges the Federal Motor Carrier Safety Administration’s new hours of service regulations.  The new rules require mandatory and specified truck driver work breaks, rest periods, and changes the existing 34 hour restart period to include consecutive nights off.  NRF had previously filed comments with the FMCSA during the rulemaking process to express the retail industry’s concerns.

“The Administration failed to take into account the serious economic ramifications faced by the broader supply chain community when drafting these rules,” Shay said.  “NRF believes that the new requirements will only drive up costs, make trucking less safe, increase congestion, and ultimately hurt job growth and the economy.  Any change in supply chain policy should be based solely on science and fact.”

Source: retailingtoday.com

Weak housing data notwithstanding, plenty of people spent money fixing up their homes this spring judging by the results of select retailers with exposure to the home improvement market.

Lumber Liquidators, operator of 277 specialty flooring stores, said its second-quarter sales increased nearly 20% to $210 million and same-store sales increased 12.4%. The company also saw a dramatic improvement in the profitability of those sales as gross margins expanded to 37.3% from 34% the prior year. Total profits more than doubled to $12.2 million, or 43 cents a share, compared with $5.3 million, or 19 cents a share the prior year.

Buoyed by a strong start to the first half of the year, the company increased its full year sales and profit forecast by a wide margin on the same day that the U.S. Commerce Department reported weaker-than-expected sales of new homes. Sales of new, single-family homes in June fell 8.4% to a seasonally adjusted 350,000 unit annual rate. That figure was below a Commerce Department estimate that put the May annual rate at 382,000. Government statistics also estimated there were 144,000 new homes for sale at the end of June, or nearly a five months supply of inventory at the current rate of sale.

The bleak news on the housing front didn’t deter Lumber Liquidators from increasing its full year sales target to a range of $750 million to $775 million, up from the previous range of $720 million to $750 million. The company also increased its full year profit forecast to a range of $1.30 to $1.42 compared to a prior range of $1.10 to $1.25.

“We believe Lumber Liquidators is successfully navigating through what remains a challenging and uncertain retail environment, particularly for large-ticket, discretionary purchases,” said Robert Lynch, president and CEO. “Our value proposition continues to resonate well with consumers, and as we look toward both the back half of the current year and into the next, we are confident in our ability to continue to drive traffic, improve our operations, expand our operating margin and grow our footprint.”

The company opened 14 new stores during the first half of the year and plans a total of 20 to 25 units for the full year.

Lumber Liquidators is benefitting from the repair and remodel trend as people stay in their homes and look to spruce up flooring. The same phenomenon is impacting the nations leading paint retailer, which reported stellar results last week. The Sherwin-Williams Company said sales during the quarter ended June 30 increased 14.6% to nearly $1.5 billion at the company’s 4,000 unit Paint Stores Group. Operating profit increased more than 29% to $267 million and same store sales increased 13.9% as the company was successful in raising prices to offset increased raw material costs.  “We are continuing to invest in our business. In the first six months, Paint Stores Group opened 20 net new locations. For the year, we expect our Paint Stores Group to open 60 to 65 new stores,” said Sherwin-Williams chairman and CEO Christopher Connor.

The strong results from Sherwin-Williams and Lumber Liquidators come as the National Association of the Remodeling Industry reports in its quarterly survey that remodelers expect to see stronger sales in the next three months. Part of their reason for optimism is due to pent up demand, but low interest rates are helping with financing as well. The remodelers surveyed by the trade group said they are seeing an increased number of inquiries, requests for bids and a higher conversion rate.

Source: retailingtoday.com

Despite a stagnant economy and drought conditions across large parts of the country, Brentwood, Tenn.-based Tractor Supply Co. reported sales and earnings growth.

The company posted second-quarter sales of $1.29 billion, up 9.6% from $1.18 billion in the same quarter last year.

The nation’s largest chain of farm and ranch specialty stores posted earnings of $106.6 million, up 8.3% from $91.2 million in the year-ago period.

“We are pleased with our ability to generate double-digit EPS growth during the second quarter, while operating in a stagnant economy and navigating weather shifts and unfavorable drought conditions,” said Jim Wright, chairman and CEO.

The company opened 18 new stores compared to 16 new store openings in the prior year’s second quarter. The company operates 1,135 stores in 45 states.

Same-store sales increased 3.2%, even as the early spring weather pulled sales out of the second quarter and into the first quarter, according to the company.

The impact of the drought across much of the middle of the country appears to have affected farmers much more than it has affected the farm and ranch retailer.

“Our team is actively managing the product assortment to meet customer needs in the affected markets as the drought continues to spread and intensify,” said Wright.

Source: retailingtoday.com

There is a lot to like when it comes to the growth trajectory at Family Dollar and its record of consistency. The company just reported its 17th consecutive quarter of double-digit earnings per share growth, and the foundation is in place for more of the same.

Total sales increased 9.6% to nearly $2.4 billion, and same-store sales increased 5% during the third quarter ended May 26. Profits during the period increased 12.1% to $124.5 million, and earnings per share increased 16.5% to $1.06 compared with 91 cents the prior year. The company ended the quarter with 7,216 stores and is on track to end its fiscal year in late August with the addition of 450 to 500 new stores.

The knock on Family Dollar during the most recent quarter related to a decline in gross margins, but that appears to be a case of the company incurring some short-term pain in the name of long-term gain. As Family Dollar has expanded its assortment of food and consumables, its rate of profitability has come down.

Gross margins declined to 35.8% during the third quarter compared with 36.2% the prior year. Of course the bright side of increased sales of lower margin frequently purchased products is they do wonders for customer traffic. During the third quarter, Family Dollar’s same-store sales increase was attributable to more people shopping its stores and buying more stuff per visit.

Another knock on Family Dollar is that it is not Dollar General. The company’s larger rival operates roughly 3,000 more stores than Family Dollar and recently surpassed 10,000 units with the opening of its first stores and a new distribution center in California. The two companies target the same customer base with similarly sized stores offering a comparable product assortment, except Dollar General produces superior financial returns.

For example, while Family Dollar’s gross margin rate declined in the third quarter, it offset the drop by reducing its expenses, but did so at a slower pace. Expenses as a percent of sales sank to 27.4% in the third quarter compared with 27.7% the prior year. As a result, the company’s operating margin rate declined to 8.4% compared with 8.6% the prior year.

By comparison, Dollar General’s lower expense structure allows it to produce a superior operating margin even though its gross margin rate is lower than Family Dollar’s. Dollar General’s expenses as a percent of sale were 21.7%, its gross margin was 31.8%, and its operating margin was slightly more than 10% during the company’s most recent fiscal year.

Family Dollar chairman and CEO Howard Levine knows that to close the gap the company must increase the productivity of its selling space.

“Delivering stronger shareholder returns begins with increasing sales per square foot, and this quarter, we began to implement a number of initiatives to broaden our consumable assortment and satisfy more of our customers’ shopping trips,” Levine said last month.

Among the initiatives to which he is referring are the addition of even more food and consumables to more stores, new brands such as Pepsi and expanded health and beauty offerings, the addition of tobacco products and Red Box movie rental kiosks.

“As planned, most of these initiatives began late in the quarter and had little impact on our third-quarter sales results. We are on schedule, and I am very pleased with the progress our teams have made in such a short period of time,” Levine said. “As we complete most of these initiatives in the fourth quarter, we will have a fully competitive assortment and will be well-positioned to accelerate sales productivity further.”

Source: retailingtoday.com

Ahead of its investor and analyst conference, Home Depot has provided an update on its strategic priorities and long-term financial targets.

Home Depot’s strategic goals include creating a stronger connection with customers and simplifying its business, improving merchandise assortment and value, improving shareholder value,and developing a competitive platform across all commerce channels.

“The Home Depot has a strong foundation of customer service, product authority and value creation. We will continue to build on our strategic priorities as we look to 2015 and beyond,” said Frank Blake, chairman and CEO.

Home Depot said it still expects sales to be up approximately 4.6% for the year and diluted earnings per share to be up approximately 17% to $2.90 for the year. In addition, the company updated its fiscal year 2012 share repurchase guidance and now expects share repurchases of approximately $4 billion. This is an increase of $500 million from the guidance provided in May 2012, but given the timing of the share repurchases, the increase will not have a material impact to diluted earnings per share for fiscal 2012. 

In June of 2009, the company announced a long term operating target of a 10% operating profit and 15% return on invested capital. The company anticipates achieving this target by fiscal year end and has now set out a new long term, fiscal 2015, operating target of a 12% operting margin and 24% return on invested capital.

Source: retailingtoday.com