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.
With the luxury of hindsight, Saks Chief Executive Stephen Sadove said he wouldn't hesitate to repeat the big markdowns of the 2008 holiday season if faced with the same tough environment that made the retailer the poster child of recessionary sales.
"It was the right thing to do to generate the cash," Sadove said at the Reuters Global Luxury Summit in New York.
After their abysmal 2009, nearly half of all U.S. retail chains plan on at least maintaining their number of stores this year, according to a survey released on Thursday by consultancy KPMG and industry group the National Retail Federation.
Far more retailers were planning to open stores than close them, according to the survey of 310 retail industry executives, representing 138 companies, conducted late last year.
No one wants it broadcast to the world when one is submitting to the indignities of airport security screening.
But that’s just what happened to luxury designer Tory Burch awhile back, when a fan tweeted to thousands that Burch was barefoot at the airport. The upside, Burch said, was that the tweet and subsequent discussion gave her the idea to create a travel sock for women.
Check out the recession. It appears it was still alive and well at Saks in the second quarter.
The upscale retailer posted a $54.5 million loss in the quarter, wider than the $32.7 million seen a year earlier.
Same-store sales fell 15.5 percent in the quarter and Saks expects that measure to fall in the mid-to-high single digits in the second half of the year.
The company has been cutting expenses and controlling inventory. The loss also was not as bad as analysts expected.
But unless a Versace dress becomes the “must-have” back to school item, the tough sales environment at Saks is likely to continue.
Also in the basket:
Cost cuts help Home Depot beat estimates
Big part of U.S. back-to-school sales still ahead: NRF
CKE same-store sales off 3.6 pct in latest four weeks
Target profit falls, but beats Wall Street view
Many U.S. consumers are not really in the mood to go on vacation. That’s understandable, with all that’s happening in the economy right now.
Guess who else is staying home this summer?
“As a family — my wife, my kids and I — are making sure we’re doing more in the way of ‘staycations’ as opposed to traveling as much,” Stephen Sadove, chief executive of upscale retailer Saks, said at the Reuters Global Luxury Summit in New York on Tuesday.
The retailer’s top executive said he was paring back expenses and planning to forgo his annual ritual of getting himself a new watch in the light of the economy.
Sadove, who has personally paid to take his wife along in the past on a few of his European buying trips, said, “I didn’t think that sent the right signal … We decided that wasn’t the right thing to be doing.”
One can only hope the struggling retailer’s sales figures start sending the right signals soon.
Home Depot, the top specialty home improvement retailer, said its quarterly profit was 35 cents per share in the first quarter, excluding items, topping Wall Street estimates for profit of 28 cents.
Premium jeans are a chic — and profitable — addition to department stores when consumers flush with cash are willing to shell out over $200 per pair. But when the economy goes south, stores and shoppers start to balk.
On Tuesday, VF Corp, maker of 7 For All Mankind jeans, said that brand’s total business was down about 10 percent in the quarter, thanks to the weak U.S. wholesale environment.
“It is absolutely a piece of the market that has been most challenged in this economy and that is the more premium luxury sector,” Chief Executive Eric Wiseman told analysts in a call following the release of first-quarter results, which were lower than the year-ago quarter.
7 For All Mankind competes with a small group of premium brands including True Religion, which announces quarterly results in early May.
The brand is sold in specialty shops, some of which are shuttering their doors in the recession, and upper-tier department stores, including Nordstrom, Bloomingdale’s and Saks Fifth Avenue.
“You see their comps so you see how they’re struggling right now to get traffic into the store,” Wiseman said.
VF’s international jeans business, too, is struggling for a good fit with the global economy.
The company, which makes Wrangler and Lee jeans sold around the world, said it was lowering its full-year earnings guidance in large part due to “a severe contraction” in the economies of Scandinavia and Eastern European countries, where jeans are apparently not at the top of the shopping list.
Just how “wonderful” consumers think your brand is can help your stock price, especially in a recession, according to a study by market research agencies Kadence, Brand Care and So What Research.
The study looked at consumer perceptions of 650 leading U.S. brands and found there is a link between the affection consumers hold for a brand — or the “wonderfulness” of the brand – and its stock performance.
With newly frugal shoppers sticking to newly shrunk budgets, Saks posted a quarterly loss that was much steeper than Wall Street expected, and said same-store sales in its fourth quarter fell 15.3 percent.
“During the quarter, the company experienced continued weakness across all geographies, merchandise categories, and channels of distribution,” said Chairman Stephen Sadove.