Shop Talk
Retailers, consumers and prices
Check Out Line: More corporate earnings to parse
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.
Even for those in negative territory, there were silver linings as apparel maker Perry Ellis said it expects to post a narrower-than-expected quarterly loss and earn more than it had previously forecast for fiscal 2011. Department store Saks reported a smaller-than-expected loss due to an uptick in luxury spending and its ability to sell more items at full price.
Also in the basket:
Check Out Line: What’s significant?
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.
The ongoing probe has been expanded to additional countries in Avon’s other international regions — Latin America; Central & Eastern Europe; Western Europe, Middle East & Africa; and Asia Pacific.
Avon also had some trouble recruiting sales representatives in China as it moves to more of a direct sales model from the boutiques it runs there. The number of active representatives in China fell 25 percent during the quarter. In 2009, the number of active representatives in China rose 32 percent. In 2008, that figure popped 79 percent.
Also in the basket:
Check Out Line: Smithfield Foods back in the black
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.
Things have already started to pick up, even though that particular business is not yet profitable. The hog unit lost $55.6 million in the latest quarter versus a loss of $253.6 million a year earlier.
Also in the basket:
Best Buy bets on 3D TV, but no quick payoffs seen
Wendy’s Peltz eyes supersizing THL’s CKE bid (New York Post)
Check Out Line: Snow’s impact in the eye of beholder
Check out the the bad and the good of the severe weather last month.
In the bad camp are restaurant chains Ruby Tuesday and Burger King, which both blamed the bad weather for keeping diners away.
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.
Last week, U.S. retailers posted their best monthly sales performance in February since just before the recession started in 2007 as fewer discounts helped them weather record-setting snow.
Also in the basket:
Check Out Line: Best Buy profit misses mark
Check Out how Best Buy missed expectations.
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.
Excluding a tax impact, its profit was 40 cents a share, while analysts had expected Best Buy to post a profit of 41 cents per share.
The failure of Circuit City, which closed its doors early this year, has helped Best Buy gain market share in past months. But the latter’s failure to meet profit expectations stood out in the broader retail sector, where several other companies have leaned on cost cuts and lower inventory to compensate for weak demand.
Also in the basket:
Check Out Line: Bottoms Up!
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
(Reuters photo)
Check Out Line: Yummy profits for food companies
Check Out the joy at Kraft and Kellogg.
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.
Still, the company stood by its forecast for 2008 earnings before some one-time items and for 2009 net income.
For its part, Kellogg, which makes Rice Krispies and Pop-Tarts, said it was confident about touching the high end of its 2008 per-share earnings target.
Other companies in the consumer and retail world that also revealed quarterly results on Wednesday include Procter & Gamble, Jones Apparel, Williams-Sonoma, and Office Depot.
Also in the basket:
Check Out LIne: Mixed profit outlooks
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)
(Photo: Reuters)
Check Out Line: The good and bad of inventory reduction
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
(Photo: Reuters)
-
Resident Shop Talk Expert
-
