Retailers, consumers and prices
The latest example of this new reality is Home Depot’s revised profit outlook.
The world’s biggest home improvement retailer said this year’s earnings from continuing operations could be flat to down 7 percent. That compares with its earlier call for a fall of 7 percent.
Home Depot Chief Executive Frank Blake said in a meeting with analysts that economic indicators are signaling that the worst of the housing downturn is over.
Home Depot still expects sales to fall by about 9 percent this year, with sales at stores open at least a year down in a high-single-digit percentage range. It expects gross margins to be flat to slightly higher.
Chief executives from Burberry Group, Hermes, Tiffany, Rolls-Royce and Richmont’s Van Cleef & Arpels are among the many officials who will speak this week at Reuters’ first-ever Global Luxury Summit about what their sector is facing amid a recession that has even well-heeled consumers dialing back spending.
In a new report, Bain & Co predicts sales of luxury goods are expected to drop 10 percent this year and not recover fully until 2012.
Wal-Mart Vice Chairman Eduardo Castro-Wright said the world’s biggest retailer is taking its time testing its convenience store-sized Marketside grocery stores, due to the economy.
Our tour will include visits to the company’s distribution center, a Sam’s Club warehouse store and a Walmart supercenter.
Although retailers have already begun to aggressively advertise deals on grills, televisions and other toys many dads dream about, the National Retail Federation‘s annual survey — conducted by BIGresearch — says they’re out of luck. Consumers are expected to spend $9.4 billion on gifts for dad, or an average of $90.89 per person, down slightly from $94.54 last year.
Check out the expected weak May sales in the U.S. retail landscape.
Despite Memorial Day sales, warmer weather and deals such as $1 flip-flops, most U.S. retailers are expected to report declines in same-store sales in May as shoppers kept hunting for bargains in the recession.
Only eight of 30 retailers are expected to post growth in May sales at stores open at least a year when companies report results this week. Walgreen kicked things off with a 1 percent increase, but that was below what analysts had expected due to weaker-than-expected sales at its pharmacy counters.
The company posted a slightly weaker-than-expected first-quarter profit and said sales dropped 22 percent as shoppers avoided jewelry. Companies like Tiffany and even more-affordable peers such as Zale Corp have seen demand hurt in the past year as consumers focus on buying necessities in the recession.
Check out Target maintaining retail margins.
That counts as a win in retail these days. The discounter was able to better manage markups and markdowns than last year, helping it keep gross margin steady, even though consumers are spending more on less profitable staples and less on discretionary items.
The company soundly beat analysts earnings estimates for the quarter. But profit still fell 13.3 percent in the quarter, not necessarily a good thing when you are in a proxy fight with an activist investor.
The story from Target was the same as the story from most retailers during this recession. Sales are sluggish or falling, they are controlling inventories and trying to rein in expenses.
AnnTaylor had the same story and reported a smaller-than-expected loss.
But it’s outlook was also cautious as the recession keeps women from buying work clothes and luxury apparel.
The question is, if consumers keep on the sidelines, how much more cost cutting can retailers do to limited the bleeding.
Also in the basket:
Tween brands posts narrower-than-expected Q1 loss
BJ’s Wholesale profit tops view; forecast raised
Sodas a tempting tax target (N.Y. Times)
By Nicole Maestri
Check out the ongoing struggle to sell clothes to recession weary Americans.
J.C. Penney and Abercrombie & Fitch both reported quarterly results that show consumers are still cutting back on non-essential items, with Penney also warning profit for the year would be worse than analysts expected.
Consumers have been hammered by the recession, mounting job losses and credit worries, and it appears they are sticking to shopping lists for groceries and other essentials, rejecting unnecessary purchases and seeking deep discounts.
While the conviction to buy only what they need has hit sales for department stores like Penney, consumers’ desire for bargains has battered Abercrombie, which has stubbornly kept prices higher than rivals, other than discounting clearance items.
“With a challenging economic environment, the consumer continues to show a reluctance to spend on premium brands; a price consciousness dictating shopping habits unlike anything I have ever seen,” said Abercrombie Chief Executive Mike Jeffries, a retail industry veteran. The teen clothing retailer posted a first-quarter loss wider than Wall Street’s expectations, and in an abrupt change, said it is conducting a strategic review of its struggling Ruehl chain. Meanwhile, Penney posted an in-line quarterly profit, but forecast second-quarter and full year results below analysts’ expectations. “We expect consumer spending and mall traffic to remain weak, which will be particularly evident against tough comparisons in the second quarter,” CEO Mike Ullman said. Also in the basket: Kohl’s, Nordstrom beat forecasts, raise 2009 views H&M April sales rebound boosts recovery hopes Target pilot pays employees to monitor health (Photo: Reuters)
Check out the quarterly results at Wal-Mart.
The retail giant posted a flat profit in line with Wall Street’s expectations, but it gained market share in the recession as consumers sought to take advantage of the company’s low prices on necessities.
Wal-Mart Chief Executive Mike Duke said the company remains cautiously optimistic about the timetable for the economic recovery, while Vice Chairman Eduardo Castro-Wright said a large part of its U.S. growth was coming from new customers.