Retailers, consumers and prices
Check out the weaker-than-expected earnings at Lowe’s.
Giving fuel to pessimists about the U.S. economy, Lowe’s, the No. 2 home improvement chain behind Home Depot, posted a quarterly profit and sales that missed analysts’ expectations, and also forecast lackluster earnings in the current quarter, underscoring “limited visibility into near-term demand.”
Sales at companies like Lowe’s had benefited immensely from the homeowner tax credit and cash for appliances programs, but now more and more uncertainty seems to be the watchword.
Last week, retailer J.C. Penney forecast a full-year profit below Wall Street’s expectations, stoking fears it would need further discounts to clear out inventory. That was a day after department stores Kohl’s and Nordstrom gave conservative profit outlooks.
“We are taking a relatively conservative approach to the economic climate and especially the moderate consumer,” Chief Executive Myron Ullman said.
Check out the differing prospects at Home Depot and Lowe’s.
Home Depot topped analysts’ expectations with its quarterly report on Tuesday morning and raised 2010 forecasts after its strong start out of the gate.
That dose of confidence came a day after smaller rival Lowe’s issued guidance that disappointed investors. Remember, Lowe’s was a bit cautious when it came to talking about the possibility of an economic recovery.
Check out who has the highest customer satisfaction ranking among major appliance retailers.
It’s Best Buy, according to a study by J.D. Power and Associates.
The electronics retailer received a 797 out of 1,000 on the scale, performing particularly well in installation service and delivery service, J.D. Power said in a news release.
The study also takes into account sales staff, the store facility, merchandise and price.
Next was hhgregg at 794 and Lowe’s at 792. Sales staff and price were pluses for hhgregg, while Lowe’s did particularly well in store facility and merchandise, J.D. Power said.
The study is based on responses from more than 4,200 consumers who bought a laundry or kitchen appliance within the previous 24 months.
Also in the basket:
Dollar Tree posts higher profit, raises outlook
Williams-Sonoma post surprise profit; ups FY view
Charming Shoppes posts Q2 profit below Street view
Toys “R” Us offers discounts for trade-ins (WSJ)
Check out the ten largest U.S. retailers.
The National Retail Federation’s STORES magazine is out with its annual ranking of the top 100 retailers.
The list shows that U.S. consumers have been focused on bargains and basic necessities, such as food and medicine. Wal-Mart tops the lineup, followed by Kroger and Costco. Home Depot fell from No. 2 in 2007 to the fourth spot in 2008 as many shoppers decided to cut back on costly home-improvement projects.
Check out the mixed messages from Home Depot.
The retailer posted better-than-expected quarterly profit. But that was still a 31-percent drop.
The company also said it expected sales to drop more this year than it previously thought.
Home improvement retailers were the leading edge of the retail slump, getting hit by the housing slowdown before the rest of the economy fell into what is likely a recession.
But with rival Lowe’s and now Home Depot both beating expectations, there could be signs of of a turnaround.
“Hardline retail stocks have historically begun their recoveries when expectations begin to be achieved, and this may be happening for Home Depot and Lowe’s,” Credit Suisse analyst Gary Balter said in a research note.
Also in the basket:
Wal-Mart says gas price drop helping store traffic
Saks third-quarter loss wider than expected
Gift card sales seen down 6 percent this holiday
Discount retailer Target Corp rang up its fifth consecutive lower quarterly profit, suspended almost all of its share buyback program and cut capital spending plans as cash-strapped consumers shifted away from its trendy merchandise to staples like food and toiletries.
Meanwhile, Lowe’s Companies, the No. 2 home improvement retailer, posted a lower profit, but even worse cut its fourth-quarter profit forecast below Wall Street’s expectations, citing rising unemployment, falling home prices and tight credit as reasons homeowners are putting off some renovations and purchases.
Sears, Roebuck is looking to grow home-goods sales by adding stores away from malls as shoppers flock to new retail centers.
That off-mall strategy includes more dealer stores located in smaller, rural markets, and home appliance showrooms in big cities.
Check out some positive signs for home improvement stores?
Goldman Sachs raised its rating on Lowe’s to “buy” from “neutral,” citing, in part, stabilization in the housing market.
“Stabilization” might be a stretch. But Goldman noted that home sales fell 15.5 percent in July, following a 17.9 percent decline in June. The drop was the smallest since July 2007 and marked the fifth consecutive monthly improvement.
The tumbling U.S. housing market has clobbered both Lowe’s and Home Depot, so any signs that the worst might be over could be a good thing for those companies.
Relatively calm hurricane seasons in the last two years have also hurt the retailers, Credit-Suisse analyst Gary Balter said.
Both retailers historically receive bumps from hurricanes, with Katrina, Rita and Wilma in 2005 “having a measurable impact not just on near term sales trends but on rebuilding for nearly one year past the hurricane event,” he said in a research note.
Gustav, Hanna, Ike, Josephine and what is currently a tropical depression could lift sales for Lowe’s and Home Depot, he said,
“Among natural disasters, hurricanes rank as the most sales impactful because unlike major winter storms, earthquakes or tornadoes, they are predictable providing a sales lift on both sides of the event,” Balter wrote.
He did note that both companies keep prices and margins low during natural disasters, but the impact of rebuilding still works its way to the bottom line.
Also in the basket:
Apparel insiders fear death by “safe” fashion
Onward buys Jil Sander owner
Back-to-school is looking like a flop (N.Y. Post)
In April, 24.5 percent of American consumers postponed a major purchase — an item of $500 or more – citing worries over higher gas prices, job security, credit card debt and the wait for a tax refund, according to a survey conducted by America’s Research Group.
That’s a big shift from a year ago, when almost 23 percent delayed a major purchase, saying they “did not want to spend the money right now.”