Shop Talk
Retailers, consumers and prices
Check Out Line: Company profits surprise despite weak sales
Check out consumer-related companies Procter & Gamble, Colgate-Palmolive, OfficeMax, Domino’s Pizza and Sally Beauty Holdings all posting better-than-expected quarterly profits despite weak consumer demand.
P&G and Colgate surprised Wall Street on Thursday, as their efforts to hike prices and cut costs helped offset weaker demand in the recession. Both companies, which are rolling out new products to entice thrifty consumers back to stores, forecast sales growth for the year, excluding the impact of currency fluctuations, acquisitions and divestitures.
Domino’s Pizza reported a better-than-expected profit, boosted by the performance of its domestic franchisees.
“Our domestic franchisees outperformed our Team USA stores in same store sales for the first time in many quarters. This is a … a strong indication that our domestic franchise system is starting to regain some positive sales momentum,” Domino’s Chief Executive David Brandon said.
Domino’s was not the only company to see bright spots.
Furniture maker and retailer Ethan Allen said the economic environment remains difficult, but that the “retail environment seems to show some indications of improvement.”
Check Out Line: April sales reports bring May worries
Check out the warning signs sprinkled amid the April sales results.
A lot of retailers reported better-than-expected sales in April as improved weather in parts of the country helped convince consumers to buy new clothes.
In fact, 61 percent of retailers that have reported so far beat estimates, according to Thomson Reuters research. Discounters, department stores and teen apparel retailers were among those posting the biggest upside surprises.
But amid those results were some comments that could be cause for worry going forward.
For example, J.C. Penney reported a less-than-expected decline in April same-store sales, but said it sees a steeper drop in May. It also said those rebate checks consumers are getting will provide, at best, only a modest benefit for sales and that any boost will be short-lived.
Wal-Mart had a better-than-expected same-store sales increase in April, but gave a tepid outlook for May. The discount retailer said consumers are trying to stretch their dollars by purchasing cheaper types of meats or trading down to pasta.
Adding to worries, Wal-Mart said the “paycheck cycle” is getting more obvious, meaning it is seeing a drop in sales at the end of the month, just before consumers get paid.
Elsewhere, Target reported weakness in areas hard hit by the mortgage meltdown, including Florida, Arizona and Nevada.
Gap same-store sales actually fell more than expected in April and the company said the economic environment remains “volatile.”
The market seems to have picked up on the negativity, as the Standard & Poor’s retail index is down almost 2 percent.
Also in the basket:
Best Buy enters Europe with Carphone retail deal
Search said to be on for new Kellwood CEO (WWD)
Sally Beauty profit tops view; shares jump
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