Shop Talk

Check Out Line: Penney gives market positive surprise

Check out the better-than-expected quarterly results and earnings forecast from J.C. Penney.

The department store operator also said same-store sales would improve during 2010 — it expects same-store sales to be flat in the first quarter and up in the “low-single digits” for the full fiscal year.

Like many retailers, Penney kept inventories tight to avoid having to slash prices to clear merchandise. That helped to boost its profits even as sales lagged.

Still, the company has underperformed several of its main competitors. Its same-store sales fell 3.8 percent in December and 4.6 percent in January, even as rivals such as Kohl’s and Nordstrom saw their sales shoot up. Penney has been hampered by a higher exposure to malls, where traffic has suffered particularly during the downturn.

But in a promising note, Penney CEO Mike Ullman said on a conference call that while he expects the economy to remain tough in 2010, he was “encouraged” by February and Valentine’s Day sales.

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Women plan to spend less at department stores, mass merchants

Last month, in a poll conducted by SheSpeaks, a women’s insights marketing firm, almost 50 percent of respondents said they would spend less this holiday. That was up from nearly 30 percent who answered the same way last year.

In a new poll, SheSpeaks asks where shoppers intend to spend fewer dollars. Here are the results from the updated poll:

If you are planning to curb your spending, where will you be spending less money?  1 – Department Store (37.64%)  2 – Mass Merchandiser (Wal-Mart, Kmart, Target)   (23.62%)  3 – Big Box Retailer (Home Depot, Staples, Toys R Us, etc.) (16.85%)  4 – Grocery Store  (11.50%)  5 – Club Store (Costco, Sam’s, etc.)  (3.94%)  6 – Discount Store (TJ Maxx, Filene’s, etc.) (4.41%)  7 – Drug Store  (2.05%) 

Aliza Freud, founder of SheSpeaks, said she was surprised by the high percent of respondents who said they would cut their spending at mass merchants like Wal-Mart and Target. Wal-Mart’s results have been outpacing rivals in recent months as consumers seek out its low prices.

But Freud said: “People are feeling like they’re not getting the deals that they really expected to get there.” She said one reason for this feeling may be the lack of coupons that these retailers distribute. Instead of relying on a retailers’ promise that they offer low prices, Freud said respondents indicated that they prefer shopping with coupons these days to feel as if they are getting the lowest prices possible.

“We think coupons are a huge opportunity right now for retailers,” Freud said.

(Photo: Reuters)

Check Out Line: Old gift cards boost Neiman Marcus

Check Out luxury department store Neiman Marcus saying their sales took a hit as even wealthy customers feel the pinch of the troubled U.S. economy, although the quarter was somewhat bolstered by customers digging out old gift cards.

Neiman Marcus‘ quarterly sales dropped 4.9 percent to $1.03 billion and comparable-store sales were down 1.4 percent.

Those in need of a luxury fix but wary of spending dug into their wallets and found old gift certificates – Neiman said it recorded $6 million in income related to aged gift cards.

Department stores have felt the pinch of higher gas and food prices and difficulty securing credit, issues that have forced customers to trim discretionary spending in favor of the necessities.

Even affluent shoppers have started to scale back spending as they lose confidence in their stock portfolios, which has hurt luxury retailers like Saks and Nordstrom.

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It wouldn’t be Christmas without pink poodles in September

It’s Christmas already at Macy’s and yes, indeed, the holiday is on sale.

More than a month ahead of Halloween, the U.S. department store chain has dragged out its colorful collection of ornaments, baubles and beads and discounted the price by 25 percent.

Trees at Macy’s Holiday Lane Christmas shop in downtown San Francisco are festooned with themed ornaments. Besides the requisite trees covered in gingerbread, Santas, and holly, Macy’s offered up a lavender tree, a pink tree, a Hawaii tree, a tree with pink flamingos, a San Francisco-themed tree, a Martha Stewart tree and, yes, a Sex in the City tree (complete with ornaments resembling pink martini glasses and pink Eiffel Towers — a nod to Carrie’s last-season stay in Paris.)

Retail watchers expect this holiday season to be downright dismal in the United States, and some have predicted that it may be one of the worst on record, given the housing downturn, rising food and fuel costs, a weakening job market, and the credit crunch — not to mention headlines from Wall Street this week. 

Macy’s did not immediately return a phone call seeking comment on whether Christmas was coming just a bit early this year — maybe to reap a few early sales before the next shoe drops in the economy?

With the exception of a handful of Italian, German and British tourists looking for souvenirs, Holiday Lane shoppers were few and far between one Friday afternoon.

“We’ve got to have a Christmas ornament from Macy’s,” said British tourist Debbie Simmonds, browsing with her daughter, tour guide in hand.

Check Out Line: Rite Aid’s June sales

Check out how generic drugs cut into June pharmacy sales at Rite Aid.

The No. 3 U.S. drugstore chain said its pharmacy same-store sales fell 0.5 percent, as generic drugs were introduced and allergy medicine Zyrtec was switched to over-the-counter status.

Generic drug rollouts hurt rival Walgreen as well. That company said a day earlier those drugs cut into its pharmacy same-store sales by 2.1 percentage points. 

Drugstores, in general, have been facing more competition from grocery stores and discounters like Wal-Mart, which have been offering discounts on a slew of prescription drugs.

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Takeover talk again swirls around Saks

Might Saks be taken over at some point? This rumor got new life on Friday when Citigroup analyst Deborah Weinswig noted that Iceland’s Baugur Group has consolidated and/or rolled over forward contracts for Saks shares into new ones that mature in July.

“We view this news as an incremental positive for our investment thesis for Saks as it increases our confidence that there is a probability of a takeout deal in Saks’s future,” Weinswig said in a research note.

The Saks takeover rumor picked up steam last year, when Baugur disclosed in an October filing that it could make a joint bid for the parent of Saks Fifth Avenue with Dubai-owned Landmark Group. Baugur repeated that in a filing this week.

The executive chairman of Baugur, Jon Asgeir Johannesson, told Reuters at the World Retail Congress in April that his company was content with its Saks holding and did not intend to make a takeover bid. Baugur, Johannesson and Landmark own about 9.7 percent of Saks common shares.

Saks shares shot up about 4 percent on Friday. Spokeswoman Julia Bentley said in an email that Saks doesn’t comment on rumors or speculation.

Stay tuned.

Check Out Line: Jobs jolt

Check out the loss of more retail jobs. 

Another 27,000 retail jobs disappeared in May, according to the U.S. government’s monthly employment report. That makes 152,000 retail jobs eliminated since the beginning of the year.   Overall, nonfarm payrolls fell by 49,000. But even more worrisome for the economy and for retailers could be the jump in the unemployment rate to 5.5 percent. That half-point jump was the largest such move in 22 years and brought the unemployment rate to its highest level in 3-1/2 years.   Retailer’s May sales reports yesterday were mostly better than expected, causing some analysts to think they could signal the beginning of a consumer turnaround.   But others said it just showed a blip in spending that was caused by the tax rebate checks consumers have begun to receive.    Economic concerns could still linger after all that stimulus money is gone, they say, and things could get worse if consumers, already hit by $4-a-gallon gasoline, soaring food prices and falling home values really start to worry about their jobs.

Wonder how a half-point jump in the unemployment number plays into that?   Meanwhile, to take your mind of the jobs report, there’s always the company pep rally that masquerades as the Wal-Mart annual meeting. The world’s-largest retailer flies in employees from all around the world to help pack the basketball arena at the University of Arkansas, where stars entertain the crowd (this year’s acts include Miley Cyrus), everybody does the Wal-Mart cheer, and, oh yeah, shareholders get to ask questions.   Also in the basket:   New Wal-Mart director may herald changing of the guard (Wall Street Journal, subscription required)   Target grows makeup artist brands, adds testers (WWD)

 (Photos: Reuters)

Check Out Line: Even Neiman Marcus feels the pinch

Check Out lower quarterly results at Neiman Marcus — the latest in a string of results proving that high-end stores are running into the same trouble as their lower-tier peers.  

The company, known for its namesake and Bergdorf Goodman stores, said on Wednesday that quarterly sales fell almost 1 percent to $1.06 billion, while net profit fell nearly 7 percent to $55.4 million.

Less than a month ago, upscale department store operator Nordstrom reported lower profit and sales, citing a challenging retail environment — a sign that luxury retail, considered more insulated from economic volatility, may not be fully immune, as rich but increasingly wary consumers witness skyrocketing gasoline and food prices, and plummeting homes values.

Even Saks reported a lower-than-expected profit last month, as markdowns hurt gross margins.

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Check Out Line: Dillard’s drive-by profit plunge

Check out Dillard’s plunging profit.

In case you missed it, the department store chain operator reported a 94 percent drop in quarterly profit after the closing bell on Thursday.

“The weak economic conditions, particularly in Florida, made it extremely difficult to achieve profitable sales levels,” Chief Executive William Dillard said in a statement.

If you didn’t know Dillard’s was reporting earnings on Thursday, you weren’t alone.

The company didn’t disclose that they planned to report until less than three hours before they released results. To put it in perspective, if you gave your doctor that little notice before canceling your check up, you would still have to pay for the appointment.

While the vast majority of public companies give at least several days notice for when they plan to report earnings and often have the date on their public calendars months in advance, Dillard’s typically does not.

The retailer also shuns other modern investor-friendly practices like making executives available to answer analysts’ questions in a quarterly conference call.

Check Out Line: Price cuts cutting Penney’s profits

Check out the 50 percent drop in quarterly profit at JC Penney.

The mid-tier department store operator had warned in late March that its first-quarter profits would be hammered after a drop in store traffic and dismal Easter sales forced it to cut prices to clear out unsold merchandise.

Penney shoppers can expect more price cuts on future visits to the retailer. 

The department store operator said it is now trying to get inventory in its stores to better match the weak sales environment, meaning it will roll out more promotions and cut future merchandise orders.

Based on its forecast, Penney is expecting profits to decline yet again in its second quarter.

It forecast earnings per share of 38 cents–a dramatic drop from the 78 cents per share of earnings from continuing operations it reported a year ago.

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