Retailers, consumers and prices
Check out the latest raft of quarterly earnings.
With investors and denizens of Main Street alike dissecting various government reports and company press releases for hints on the relative strength or weakness of the U.S. economy, the latest slew of quarterly earnings arrived to parse, including better-than-expected results from Wal-Mart Stores and Home Depot.
Wal-Mart posted a better-than-expected profit helped by cost cuts and growth in international markets as sales at U.S. stores open at least a year fell. The world’s largest retailer also raised its full-year profit forecast.
Home Depot, the largest home improvement chain, reported a slightly better-than-expected profit on tighter cost controls, but sales missed analysts’ expectations as consumers curbed purchases in the grim U.S. economy. The results prompted the company to boost its profit outlook and shave its sales forecast for the year.
Apparel retailer Abercrombie & Fitch also posted a profit that topped expectations as the company’s discounts drew customers and lifted sales, while Danish brewer Carlsberg’s higher profit surprised and it raised its 2010 outlook.
Check out Avon’s dose of disclosure.
The world’s top direct seller of cosmetics (led by Chairman and CEO Andrea Jung, shown here) topped analysts’ expectations with its quarterly profit.
It also gave a little more insight into its ongoing investigation about possible bribery in China — which is by far its smallest market, but one with great potential. The company said fees paid to professionals working on the probe were “significant” in the latest quarter.
Check out Smithfield Foods turning a quarterly profit for the first time since 2008.
The company — probably best known by consumers for brands such as Butterball — also said its hog unit should improve in the fiscal year that starts this May, after being a drag on results for some time.
Check out the the bad and the good of the severe weather last month.
Squarely in the good camp was sporting goods retailer Dick’s Sporting Goods, which posted a better-than-expected quarterly profit on strong demand for cold weather gear.
The top U.S. consumer electronics retailer checked in with a lower-than-expected profit on Tuesday, as it still had trouble selling videogames and digital cameras to cautious shoppers.
Its profit fell to $158 million, or 37 cents per share in the second quarter that ended Aug. 29, from $202 million or 48 cents per share, a year earlier.
Check out the slowing sales at Diageo.
The world economy is in a shambles. You would think people would drink more, not less.
But Diageo — the folks who make Smirnoff vodka, Guinness beer and Johnnie Walker whisky — warned today that sales growth was slowing – a lot.
The company slashed its profit growth forecast and said it did not expect any improvement in the second half of the year from slowing sales growth it saw in the first half.
“What we are seeing is sales growth slowing. Consumer demand is soft in certain parts of the world, we are seeing some destocking and we are stopping some orders where we have concerns about credit quality,” Finance Director Nick Rose said in an interview.
The company also said it would cut an unspecified number of jobs as part of a program aimed at reducing costs by $144 million
Hopefully, somebody will by those displaced workers a drink.
Also in the basket:
Coca-Cola profit tops view, shares rise
U.S. retail sales unexpectedly up 1 percent
Both Kraft, the largest North American food maker and Kellogg, the world’s largest cereal company, posted third-quarter profits that topped Wall Street’s expectations thanks to price increases and new items. The results are yet another nod to the fact that while you may shun clothes, jewelry or furniture during crunch times, you still gotta eat.
But Chief Executive Irene Rosenfeld of Kraft, with brands from its namesake cheese and Maxwell House coffee to Oreo cookies and Toblerone chocolates, warned that tight credit conditions could cause some retailers to liquidate their inventories, which could affect product shipments in the fourth quarter.
Check out retailer’s different views on future profits.
Kohl’s, the mid-priced department store, says it expects third quarter earnings to be better than expected, while upscale Nordstrom cut its forecast range.
That’s not to say that Nordstrom’s consumers are flocking to Kohl’s as the U.S. economy suffers. Kohl’s profit fell in the second quarter. But cutting inventory was enough for it raise its profit estimate for the full year. Deutsche Bank retail analyst William Dreher also said the company will be able to set itself apart with fresh merchandise because it cleaned out its inventory.
Nordstrom, meanwhile, cut its full-year profit outlook. But while its customers are spending less, the retail chain says they are not trading down.
And if they were, they certainly aren’t trading down to J.C. Penney, which saw a 36 percent drop in profit and forecast third quarter earnings below analysts’ estimates. Sales also fell 2.5 percent.
Also in the basket:
H&M defies retail gloom as July sales top forecast
Swatch upbeat on H2 as Olympics boosts sales
Back-to-School discounts are deeper, more creative (N.Y.Times)
Check out how bad retail sales can actually mean good earnings.
It all comes down to inventory management. Retailers have aggressively cut inventory levels in order to cope with the slumping economy.
The bad news resulting from that strategy came last week when many retailers posted disappointing sales, in part because they had less goods on hand to sell.
“Our inventory levels in … clearance and transitional categories were significantly lower than last year, affecting sales results, but leading to improved gross margins,” Kohl’s Chief Executive Larry Montgomery said in a statement.
But the good news could come over the next several weeks, when retailers report second-quarter earnings. Those slashed inventories should have helped them preserve margins, which help profits.
So it’s not like the U.S. consumer is buying that much. But at least retailers didn’t get left with shelves of unwanted inventory.
Also in the basket:
Giant retailers look to sun for energy savings (N.Y. Times)
InBev seen posting modest profit growth in Q2