US Q2 in brief: Finish Line, Zumiez, Cherokee, Gymboree
just-style's round-up of Q2 apparel and footwear industry results
Second-quarter earnings for the retail sector as a whole are forecast to be lower than the prior month, despite easy year-on-year comparisons. The Finish Line posted a small drop in net income, Zumiez saw its profit more than halve, Cherokee Global Brands posted a double-digit decline in net earnings, while Christopher & Banks swung to a loss, and Hudson's Bay was back in the black.
US athletic apparel and footwear retailer The Finish Line saw its net profit drop 1.1% due to 3.9% increase in the cost of sales and 5.1% rise in selling, general and administrative expenses. For the 13 weeks to 29 August, net income amounted to $25.9m from $26.2m in the same period of the prior year. Sales increased 3.5% to $483.2m from $466.9m last year, while comparable store sales edged up 1.5%.
Separately, the company revealed it is to rebrand all stores within the Running Specialty Group as JackRabbit. Conlumino analyst Neil Saunders described it as a "sensible" move that should help streamline costs and operations. He added: "It also gives Finish Line a cohesive brand which should allow it to play strongly in the more serious sports enthusiast market – a segment where it has traditionally been much weaker than its rivals."
Action sportswear and footwear retailer Zumiez saw its profit more than half, weighed down by $400,000 in costs related to its acquisition of Blue Tomato, and a slowdown in domestic sales. Net income amounted to $3.2m for the three months to 1 August, compared to $7.5m in the same period of the prior year. Sales climbed 1.8% to $179.8m from $176.7m last year, while comparable store sales fell 4.5%, due to a lack of trend right fashion in its US channels.
Stifel analyst Richard Jaffe said: "The footwear trend toward more of an "athletic/basketball shoe" has not been good for the company given that is not what the target customer seeks nor finds at a Zumiez store."
Cherokee Global Brands
Cherokee Global Brands posted a 17.4% decline in net income, hurt by lower revenues. Net income reached $1.9m for the three months to 1 August, compared to $2.3m in the same period of the prior year. Revenues fell 3% to $8.5m from $8.8m last year, primarily due to the increased strength of the US dollar and lower sales of Cherokee-branded products in the UK and Canada.
The company also revealed that Target Corp will not renew its license of the Cherokee brand in the US, which will expire on 31 January 31 2017. Cherokee said it does not expect the non-renewal to have any material impact on its revenue in fiscal 2016.
Children's apparel retailer Gymboree Corp narrowed its second-quarter loss, thanks to higher sales. For the 13 weeks to 1 August, the company's net loss stood at $25.4m, compared to $32.9m in the same period of last year. Sales increased 3.5% to $273.5m from $264.3m a year ago. Comparable sales, including online sales, rose 2%. Gross margin improved to 36.8% from 36.5% last year.
Christopher & Banks Corp
Christopher & Banks swung to a loss, weighed down by lower sales and margins. The company's net loss amounted to $700,000 for the 13 weeks to 1 August, compared to a profit of $3.4m in the same period a year ago. Sales declined 11.8% to $94m from $106.6m last year, while same store sales fell 12.4%. Gross margin slipped to 32.9% from 35.3% in the prior year. President and CEO LuAnn Via described the performance as "disappointing", and reflected a combination of macro headwinds and company-specific factors that impacted the business.
Department store operator Hudson's Bay returned to profit during its second quarter, helped by strong sales growth. For the 13 weeks to 1 August, net income reached $67m, compared to a loss of $36m in the same period of the prior year. Retail sales, which include digital sales from all banners, increased 15.2% to $2.04bn from $1.77bn in the prior year, while same store sales grew 14.3%. Gross margin improved 50 basis points to 40.1% from 39.6% last year.
Yoga wear brand Lululemon Athletica has lifted its full-year outlook despite posting a 2.2% fall in profit. For the 13 weeks to 2 August, net profit amounted to $47.7m, compared to $48.7m in the same period of last year. Revenue beat company forecasts by increasing 16% to $453m from $390.7m last year, while gross margin dropped to 46.8% from 50.5% a year ago.
The company now expects revenue to range from $2.03-2.06bn based on total comparable sales in the high single digits on a constant dollar basis. Earnings are forecast to be between $1.87 and $1.92 per share. This is up respectively on its earlier guidance of $2-2.05bn, mid single digit growth and $1.86-1.91.
Men's Wearhouse increased its net profit more than threefold, driven by strong performances at its legacy brands. Net income reached $47.8m for the three months to 1 August, compared to $12.3m in the same period of the prior year. Sales grew 14.6% to $920.1m from $803.1m last year. Retail segment sales increased by 16.6%, while corporate apparel sales dropped 8.2%. Comparable sales were up 3.1% at Men's Wearhouse, 0.7% at Moores and 6.7% at K&G. However, Jos. A. Bank posted a 9.4% decline. Gross margin increased 86 basis points to 45.5%.
Conlumino analyst Neil Saunders said: "Looking ahead, we believe that the core Men's Wearhouse brand will continued to grow; however, Jos A Bank will remain problematic as it is integrated into the wider business."
Pacific Sunwear saw its net profit increase 10.7%, thanks to a non-cash gain of $15.7m. For the three months to 1 August, net income reached $8.3m, up from $7.5m in the same period a year ago. However, sales declined 7.6% to $195.6m from $211.7m last year, and comparable store sales fell 6%. The retailer also launched an expense reduction initiative, aimed at reducing $15m from its current expenses in fiscal 2016. President and CEO Gary Schoenfeld said half of the savings would come through more streamlined execution of its stores, while the other half would come from restructuring the company's operations at its headquarters and the reconfiguration of certain positions and departments.
US fashion department store retailer Belk saw its profit more than halve, hurt by increased expenses relating to continued investment and costs associated with its merger agreement with private equity firm Sycamore Partners. Net income amounted to $14.5m for the 13 weeks to 1 August, compared to $30.6m in the same period of last year. Sales rose 1.2% to $917.4m from $906.5m last year, with online sales jumping 35.6% year-on-year. Chairmen and CEO Tim Belk said: "Back to school sales have been encouraging, and we believe we are well positioned for the fall."
US apparel and footwear retailer Genesco has booked a hike in net profit, helped by higher sales. For the three months to 1 August, net income jumped 60.2% to $7.5m from $4.7m in the prior year period. Sales increased 7% to $656m from $615m. Comparable store sales also rose 5%, with a 4% increase at Journeys Group, 8% growth at both Schuh Group and Lids Sports Group, and Johnston & Murphy Group was up 10%.
Oxford Industries, owner of the Tommy Bahama and Lilly Pulitzer brands, has lifted its full-year outlook despite swinging to a loss in the second quarter. Its net loss stood at $2m for the three months to 1 August, compared to a profit of $15.1m in the prior year period. Sales increased 10% to $250.7m from $227.6m last year, primarily due to growth at Lilly Pulitzer and Tommy Bahama. Gross margin improved to 60.3% from 59.9% a year ago. The company now expects full-year earnings per share to range from $3.44-3.59 and net sales to be between $975m and $990m. This compares to its earlier guidance of $3.27 and $920.3m respectively.
Sears Canada returned to profit despite lower sales and margins. Net earnings amounted to $13.5m for the 13 weeks to 1 August, compared to a loss of $21.3m in the same period of the prior year. This included a pre-tax gain of $67.2m on a transaction involving the sale and leaseback of three properties in British Columbia and Alberta. However, revenue declined 9.1% to $768.8m from $844.4m last year, while same store sales across all channels fell 3.9%. Apparel and accessories same store sales fell 8.3% year-on-year. Gross margin dropped to 32.8% from 33.3% a year ago, weighed down by the weakening Canadian dollar.
G-III Apparel Group has lifted its full-year earnings guidance after more than doubling its second-quarter net profit. For the three months to 31 July, net income reached $12.5m, compared to $6.2m in the same period of the prior year. Net sales increased 12% to a record $474m from $424m last year, driven by a "robust" wholesale and retail performance. The company now expects full-year net income to range from $129-134m, up from its previous guidance of $123-128m.
Footwear retailer Shoe Carnival saw its second-quarter earnings jump 84.6%, thanks to an increase in sales, albeit at a slower rate than the prior quarter. Net earnings amounted to $4.8m for the three months to 1 August, compared to $2.6m in the same period last year. Sales increased 2.6% to $227.8m from $222.1m a year ago, while comparable store sales edged up 0.5%. The company said the solid start to the quarter was muted by an anticipated shift in tax-free holidays to the third quarter of this year from the second quarter of fiscal 2014. Gross margin improved to 29.1% from 28% in the prior year.
Conlumino analyst Stephen Ward said: "Looking beyond this quarter we remain fairly positive about Shoe Carnival's future prospects and see a number of initiatives helping to deliver growth. Foremost among these is online, which now benefits from around 350 stores having fulfilment capability."
US omni-channel retailer J Crew has moved to a loss in its second-quarter but said it is positioning the business for sustained growth in the second half. Net losses amounted to US$13.6m from earnings of $10.8m a year earlier. Gross margin narrowed to 34.3% from 37.6% in the second quarter of last year. Total sales were down 5% to $593.6m, while comparable sales dropped 11%. J Crew said it has taken "a hard look" at the business and made changes to drive greater efficiency and profitability.
Bebe Stores has signed a licensing deal to open up to 150 retail points of distribution in Greater China, Hong Kong, Macau and Taiwan, as it revealed a narrowing of losses in its second-quarter. The five-year agreement with Shanghai-based agency Longgoal LLC, will see the first boutique open in the summer of 2016. Net losses in the quarter narrowed to US$5.2m from $34.5m in 2014. Gross margin widened to 34.8% from 30.9% thanks to fewer promotions and better leverage from occupancy costs. Sales edged up 0.7% to $104.3m, while comparable sales increased 1.1%.
Destination XL Group
Big and tall men's wear retailer Destination XL Group said it delivered an "outstanding" quarter thanks to long-term plans to deliver improvements in sales and profits. Total sales grew 9.6% to US$114.1m, with comparable sales up 6.7%. Gross margin, inclusive of occupancy costs, was 47.2% from 46.3% in the year ago period thanks to an improvement in occupancy costs, an improvement in merchandise margin, and lower markdowns. Net losses narrowed to $1m from $4m last year.
US casual apparel retailer Aeropostale has booked a net loss for the eleventh straight quarter. Losses in the three months ended 1 August narrowed to US$43.6m from $63.8m a year earlier. Total sales dropped 17% to $326.9m, while comparable sales, including the e-commerce channel, decreased 8%. The company has forecast a loss of $0.30-$0.38 for the third quarter. Thomson Reuters' analysts on average were expecting a loss of $0.31 per share.
Dollar General booked increases in net profit and sales, including apparel. Net income grew 12.4% to $282m during the three months to 31 July, from $251m last year. Sales increased 7.9% to $5.10bn from $4.72bn a year ago, while comparable store sales were up 2.8%. Apparel sales rose 4.7% year-on-year. Gross margin improved 36 basis points to 31.2%.
Conlumino analyst Neil Saunders said: "While scale does matter in the value segment, Dollar General is more than big enough to succeed – even against its newly enlarged rival. As such, it will be operational agility and effectiveness that provides the real edge to the long-term winner."
Burlington Stores has upped its full-year guidance after returning to profit in the second quarter. For the three months to 1 August, net income reached $10.9m, compared to a loss of $6.5m in the same period of the prior year. Sales grew 9.6% to $1.14bn from $1.04bn last year, while comparable store sales increased 5.6%. Gross margin improved by 100 basis points to 39.2% from 38.2% a year ago. The company now expects net sales to increase 6.5-7% and comparable store sales to rise 2.5-3%, up from its earlier guidance of 6-7% and 2-3%.
Conlumino analyst Stephen Ward said: "Overall, we remain positive about Burlington's future prospects."
Destination Maternity has lowered its full-year outlook after swinging to a second-quarter net loss. The company's net loss amounted to $2.7m for the three months to 1 August, compared to a net profit of $300,000 in the same period last year. Sales edged down 1.2% to $119.3m from $120.8m last year, while comparable sales increased 2%. Gross margin fell to 46.4% from 49.8% a year ago, reflecting price promotional and markdown activity to clear out-of-season and excess current season merchandise. The group now expects comparable sales and margins to be flat, down from its earlier guidance of low single digit growth and a slight increase respectively.
US fashion business Guess saw earnings and sales fall in its second-quarter but raised the lower end of its full-year earnings guidance. Net profit dropped 16.7% to US$18.3m, while revenues dropped to $546.3m from $608.6m a year earlier. In the Americas, sales were down 5%, while Europe sales fell 15%. Asia revenues dropped 12%. For the full year, Guess now expects per-share earnings between 89 cents and $1.02 a share, compared with its previous low point of 86 cents.
Apparel giant PVH Corp has booked higher second-quarter EPS and sales that exceeded guidance thanks to continued strength in the Calvin Klein business. Earnings per share on a non-GAAP basis amounted to $1.68, an increase of 11% on EPS of $1.51 last year. Net income dropped to US$102.2m from $126.5m a year earlier, negatively impacted by foreign currency exchange rates. Total revenue declined 5.6% to $1.86bn. PVH has raised its full-year EPS guidance to $6.90 to $7.00 on a non-GAAP basis, from previous guidance of $6.85 to $6.95.
Abercrombie & Fitch
Teen apparel retailer Abercrombie & Fitch reported a 95% decline in net profit, weighed down by lower sales. For the 13 weeks to 1 August, net profit amounted to $612,000 compared to $12.9m in the same period of the prior year. Sales declined 8% to $817.8m from $890.6m. Comparable sales fell 4%, with a 7% decline at Abercrombie and 1% drop at Hollister. In the US, net sales fell 6% to $514.5m, while international sales declined 12% to $303.2m. Gross margin, however, improved to 62.3% from 62.1% a year ago.
Conlumino analyst Neil Saunders said: "The reinvention will take time to filter through into public perceptions, just as it will also take time for Abercrombit & Fitch to re-establish itself in the hearts and minds of young consumers. However, the company is at least now taking the right steps to lead it down the road to recovery."
US apparel retailer Express has lifted its full-year outlook, after increasing its second-quarter profit by more than threefold. Net income reached $21m for the 13 weeks to 1 August, compared to $6.9m in the same period of the prior year. Sales grew 11% to a record $535.6m from $481.4m last year, and comparable store sales increased 7%. E-commerce sales jumped 21% to $75m. Gross margin improved 480 basis points to 33.1% from 28.3% a year ago. The company now expects full-year net income to range from $105-111m, up from its earlier guidance of $89-98m, with comparable store sales up in the mid single digits, up from its earlier forecast of low single digit growth.
FBR & Co analyst Susan Anderson said: "Express appears to have good momentum heading into 2H15, which we believe is reflected in its 3Q comp guidance of +mid single digit (versus FBR/consensus of +low single digit) and in its above-consensus EPS guidance."
US women's wear retailer Chico's said it will exit the Boston Proper format, after posting a 93% decline in second-quarter net profit. Net income amounted to $2.1m for the 13 weeks to 1 August, compared to $30.1m in the same period of the prior year. Sales rose 1.4% to $680.4m from $671.1m last year, while comparable store sales edged up 0.5%. Gross margin improved 140 basis points to 53.8%, thanks to a decline in promotional activity, and benefits from cost reduction efforts.
FBR & Co Susan Anderson said: "We continue to be encouraged by CHS's trajectory and operating profile transformation as the path towards a +low double-digit EBIT margin becomes clearer via its initiatives."
US footwear and accessories retailer DSW has said it remains confident in its direction after second-quarter earnings grew 9.6%. Net income reached $37.6m for the 13 weeks to 1 August, compared to $34.3m in the same period of the prior year. The company said this reflected a significant shift in favour of regular priced merchandise selling. Sales increased 6.8% to $627m from $587m last year, while comparable sales climbed 1.8%. Gross profit improved 120 basis points, driven primarily by lower markdown activity. President and CEO Mike MacDonald said: "We were encouraged with our accomplishments in the second quarter."
US apparel retailer The Children's Place has said it expects full-year adjusted earnings per share to be at the higher end of its earlier guidance, despite seeing its second-quarter loss widen. For the 13 weeks to 1 August, net loss amounted to $13.7m, compared to a loss of $10.7m in the same period of the prior year. Sales declined 4.7% to $366.5m from $384.6m last year, while comparable store sales fell 3.5%, weighed down by currency exchange rate fluctuations. The company now expects adjusted EPS to range from $3.35-3.45, up from its earlier guidance of $3.30-3.45.
FBR & Co Susan Anderson said: "We believe significant 2H15 gross margin opportunity remains, with favourable product costs, controlled inventories, and inventory allocation and replenishment tools coming on line."
US speciality athletic retailer Foot Locker said it had an "outstanding" quarter after posting higher sales and earnings for the three months ended 1 August. Net income grew to US$119m from $92m a year earlier, representing growth of 33%. The company's gross margin rate improved to 32.6% from 32% a year ago, while comparable sales were up 9.6%. Total sales increased 3.3% to $1.69bn. Excluding foreign currency fluctuations, sales grew 9.9%.
Håkon Helgesen, retail analyst at Conlumino, notes: "The main thrust of growth was driven by the continued high levels of demand for athletic footwear, especially across the United States. Here Foot Locker's strategic advantage is its strong relationship with Nike which ensures high levels of product availability, including styles that are not easily obtainable elsewhere."
US retailer Hibbett Sports has lowered its full-year sales and earnings guidance as a result of soft revenues across a number of states, but says it is confident of improvements for the remainder of the year. Earnings dropped to US$7m from $8.4m a year earlier, while gross margin narrowed to 32.7% from 33.2% due to markdowns taken early in the quarter to liquidate excess inventory. Net sales grew 2.8% to $199.3m, but comparable sales dropped 1.1%. For the full year, Hibbett has forecase diluted EPS of $2.80 to $2.90, from previous guidance of $2.95 to $3.04. Comparable store sales are expected to be flat or increase in the low single-digit range for the year, from previous guidance of a low single-digit increase.
Off-price fashion retailer Stein Mart has booking a "strong" second-quarter, driven by leveraging increased sales with a higher gross profit rate. Net income for the period ended 1 August reached US$4.1m from earnings of $1.7m in 2014. Gross margin widened slightly to 28.5% from 28.3%, thanks to slightly lower markdowns offset by higher occupancy costs. Sales grew 4.5% to $311.6m, while comparable sales were up 3%.
New York & Co has narrowed its net loss in the second quarter and reduced operating costs related to its turnaround plans. In the quarter ended 1 August, net losses amounted to US$146m from $147m a year earlier. Gross margin widened to 28.5% from 27.4% due to improved leverage of buying and occupancy costs, while sales were up 4.2% to $235.7m. Comparable store sales increased 3.8%. The company also updated its improvement plans – known as Project Excellence - and will reduce future operating costs by around $30m, up from a prior estimate of $20m to $25m.
US off-price fashion retailer Ross Stores booked higher earnings and sales in the quarter but warned on a "challenging" second-half. Earnings reached US$259m from $240m last year, while operating margin narrowed to 28.6% from 28.8%. Sales, however, were up 9% to $2.97bn, with comparable store sales up 4% over the prior year. The company said it is maintaining a cautious outlook for the remainder of the year due to more challenging sales and earnings comparisons and uncertain macro-economic and retail landscapes. For the full year, it is projecting profit of $2.40 to $2.45, up from a previous forecast of $2.36 to $2.44 per share.
US apparel business Perry Ellis International narrowed its losses in the second quarter, recording a "solid" performance across all key metrics. Net losses amounted to US$1.3m from $1.6m a year earlier, benefiting from improved operating results as well as a lower effective tax rate for fiscal 2016. Gross margin expanded 110 basis points to 35.7%, while sales grew 5% to $213.3m. The company upped its full-year adjusted EPS guidance to a range of $1.78 to $1.85.
Value-priced fashion retailer Cato Corp has booked a mixed second-quarter as earnings and margins fell slightly, but sales climbed. Net income dropped to US$15.6m from $15.7m a year earlier, while gross margin narrowed to 38% from 39% last year. Sales climbed 2% to $249.2m, while same-store sales remained flat. The company reiterated its second-half earnings per diluted share guidance of $.46 to $.55.
US department store retailer Stage Stores has lowered its full-year guidance as it revealed plans to close 90 stores as part of a multi-year strategic evaluation of its real estate portfolio. Net income in the quarter ended 1 August dropped to $1.6m from $11.2m a year earlier. Sales edged up 0.9% to $380.9m, while comparable sales were up 0.8%. The company said it was challenged by the impact of a weaker peso and economic softness in parts of the US. It now expects adjusted earnings to be between $1.05 to $1.15 per diluted share, compared with previous guidance of $1.20 to $1.28, and comparable sales to be flat, from previous guidance of flat to 2%.
The Buckle has booked a drop in earnings in its second-quarter ended 1 August. Net income fell 4.1% to US$23.5m from $24.5m a year earlier. Net sales, however, edged up 0.1% to $236.1m, while comparable store sales decreased 1.7%.
Sears Holdings moved to a profit in its second-quarter, marking the group's fourth consecutive quarter of improved results, in line with guidance. Net income amounted to US$208m from a loss of $573m last year. Gross margin widened to 23.1% from 21.7% in the year ago quarter, while sales were down $1.8bn to $6.2bn in the quarter ended 1 August. The latter was related to streamlining actions taken by the company last year.
Neil Saunders, CEO of Conlumino, noted: "While Sears can play for time with its various financial machinations, it cannot shrink its way to long term profitability. To do that it needs to grow same store sales and to improve productivity."
The Bon-Ton Stores
US department store retailer The Bon-Ton Stores has warned on the second half and adjusted its full-year guidance as its net loss widened in the second-quarter. For the three months ended 1 August, net losses amounted to US$39.6m from $36.2m a year earlier. Gross margin increased 24 basis points to 36.8%, but net sales fell 1.4% to $555.4m, pressured by unseasonably cool weather. Comparable sales were down 1.3%. For the full year, Bon-Ton is forecasting adjusted EBITDA in the range of $145m to $155m.
L Brands, owner of lingerie brands Victoria's Secret and La Senza, has lifted its full year earnings outlook after booking a 7.5% increase in net profit. Net income reached $202.5m for the three months to 1 August, compared to $188.4m in the same period last year. Sales rose 3% to $2.77bn from $2.68bn a year ago. Comparable store sales were up 4%, helped by a 3% gain at Victoria's Secret and a 5% increase at Bath & Body Works, while direct posted a 5% decline. The company now expects full-year earnings per share to range from $3.58-3.73, up from its earlier guidance of $3.50 to $3.70.
Although third-quarter EPS is forecast to be between $0.40 and $0.45, below the street's estimate of $0.49, Stifel analyst Richard Jaffe believes it is likely "a case of under promise, over deliver".
General merchandise retailer Target Corp has raised its full-year earnings guidance after seeing its second-quarter profit increase more than threefold. Net earnings reached $753m for the three months to 1 August, compared to $234m in the same period last year. Sales increased 2.8% to $17.4bn from $17bn last year, while comparable store sales rose 2.4%. Online sales grew 30%. Gross margin improved to 30.9% from 30.4%, reflecting the benefit of annualising heightened promotional markdowns in the second quarter of 2014, and a favourable merchandise mix this year. Target now expects full-year 2015 adjusted EPS to reach $4.60-4.75, compared to its previous guidance of $4.50-4.65.
Chairman and CEO Brian Cornell said: "While the momentum in our financial results is encouraging, we have much more to accomplish. Looking ahead, we are focused on making further progress against our strategic priorities and are committed to improving operations as we move through the important back-to-school, back-to-college and holiday seasons."
Teen apparel retailer American Eagle Outfitters saw its net profit increase more than fivefold, thanks to record sales. Net income reached $33.3m for the 13 weeks to 1 August, compared to $5.8m in the same period a year ago. Revenue grew 12% to a record $797m from $711m last year, while comparable store sales increased 11%. Gross margin rose 230 basis points to 35.7%. Interim CEO Jay Schottenstein said he was "pleased" with the performance, adding that customers have taken notice of improvements to our merchandise and overall customer experience.
Stifel analyst Richard Jaffe said: "We believe the momentum of American Eagle Outfitters' merchandise turnaround is strong and sustainable. Going forward, merchandise improvement, combined with easy comparisons, should drive EPS growth."
Value fashion retailer Citi Trends returned to profit in the second quarter, thanks to higher sales. Net income reached $200,000 for the three months to 1 August, compared to a loss of $2.6m in the same period last year. Sales increased 6.1% to $153.9m from $145m, while comparable store sales were up 3.9%.
Phoenix Footwear saw its net loss widen, weighed down by lower sales and margins. The company's net loss amounted to $651,000 for the three months to 4 July, compared to a loss of $375,000 in the same period of the prior year. Net sales fell 5% to $4.1m from $4.3m a year ago, primarily due to an increase in discounts and markdown allowances provided to US online and big box retailers. Gross margin declined to 28.1% from 33% last year.
Retail behemoth Wal-Mart Stores cut its full-year earnings outlook after posting a 16.6% decline in second-quarter net profit. Net income amounted to $3.64bn for the three months to 31 July, compared to $4.36bn in the same period a year ago. Earnings were pressured by currency fluctuations, lower Wal-Mart US margins and investments in customer experience. Net sales were flat at $119.33bn, with growth of 4.8% in the US and a 9.6% decline in its international business. Sam's Club saw a 0.9% fall in sales. Total online sales (both national and US) grew by 16%. The company now expects full-year earnings per share to a range from $4.40-4.70, compared to its previous guidance of $4.70-5.05.
Conlumino analyst Neil Saunders said: "Wal-Mart has struggled to generate overall growth across its global operation. However, this masks a great many initiatives and developments which are now powering the domestic operation. At home, Wal-Mart is fighting back – arguably, something that should be a concern to many other retailers."
The TJX Companies has upped its full-year outlook after posting a 6.1% increase in second-quarter profit, thanks to higher sales. For the three months to 1 August, net income reached $549m, compared to $517.6m in the same period of last year. Sales increased 6% to $7.4bn from $6.92bn in the prior year, while comparable store sales were up 6%. Gross margin improved 0.5 percentage points to 29.1%, primarily due to buying and occupancy leverage on the 6% comp growth. The company now expects full-year earnings per share to range from $3.24 to $3.28, compared to its previous guidance of $3.21-3.27.
Conlumino analyst Neil Saunders said: "Looking ahead, we remain positive about the future prospects of TJX – especially because we believe the company has a very balanced growth programme which will allow it to drive gains from a number of different initiatives."
Dick's Sporting Goods has lifted its full-year earnings guidance after booking a 30.8% hike in net profit. Net income reached $90.8m for the 13 weeks to 1 August, compared to $69.5m in the same period in the prior year. Sales increased 7.9% to $1.82bn from $1.69bn last year, while same store sales climbed 1.2%. Same store sales at Dick's Sporting Goods rose 1.5%, while Golf Galaxy fell 2.9%. The company now expected full-year earnings per share to be $3.13-3.21, compared to its earlier guidance of $3.12-3.20.
Lifestyle retailer Urban Outfitters saw its net profit edge down 1%, despite record sales. Net income amounted to US$66.8m for the three months to 31 July, compared to $67.5m in the same period last year. Sales increased 7% to a record $867m from $811.3m last year. Comparable retail store sales, which include its comparable direct-to-consumer channel, were up 4%, with Free People increasing 14%, Urban Outfitters 4% and Anthropologie Group 2%. Wholesale sales grew 21%. Gross margin declined by 71 basis points year-on-year, primarily driven by higher delivery and fulfilment centre expenses.
FBR & Co analyst Susan Anderson sees good Urban Outfitters progress, but light Anthropologie trends decrease visibility. "While we are encouraged by Urban Outfitters momentum and its initiatives, Anthropologie did not appear to show significant inflection in late 2Q," she said.
Ailing retailer American Apparel reported a wider loss, with both sales and margins falling. Net loss amounted to US$19.4m for the three months to 30 June, compared to a loss of $16.2m in the same period of the prior year. American Apparel said the results includes $8.3m related to significant charges. Sales fell 17.2% to $134.4m from $162.4m last year. Gross margin dropped to 45.8% from 50.7%, primarily due to lower retail sales coupled with the negative effects of foreign currency exchange rate changes and an increase in workers compensation and health benefit costs.
Department store retailer JC Penney adjusted its full-year earnings outlook after seeing its net loss narrow. For the three months to 1 August, net loss amounted to US$138m, compared to $172m in the same period last year. Sales were up 2.9% to $2.88bn from $2.80bn, while comparable store sales increased 4.1%. Men's, home, Sephora and fine jewellery were the company's top performing merchandise divisions. Gross margin improved 100 basis points to 37% from 36% a year ago, driven by improvements in our clearance and promotional selling margins. The retailer now expects full-year EBITDA to reach $620m, up from its earlier guidance of $600m.
Conlumino analyst Stephen Ward said: "Although there are many criticisms of JC Penney, none of these are to denigrate the work done to date, which has helped stabilise a company that was at risk of failing. However, there is no doubt that JC Penney remains a work in progress."
Upscale fashion retailer Nordstrom booked a 15.3% increase in second-quarter net profit, reflecting new strategic initiatives and growth investments. Net earnings reached US$211m for the three months to 1 August, compared to $183m in the same period of the prior year. Sales grew 9.2% to $3.6bn from $3.3bn, while comparable store sales increased 4.9%.
Conlumino analyst Neil Saunders said: "Overall, we believe that Nordstrom is striking the right balance between ambition and caution. Its steady pace of expansion, coupled with its innovation to services and products, mean its sales outperformance looks set to continue."
US department store retailer Kohl's saw its second-quarter net profit slide, due to a delay in back-to-school shopping, as a number of states shifted their tax-free sales from July to August. Net income plummeted 44% to $130m for the three months to 1 August, from $232m in the same period a year ago. Sales, however, edged up 0.6% to $4.27bn from $4.24bn, while comparable store sales climbed 0.1%. Gross margin dropped to 38.9% from 39% last year. Conlumino analyst Stephen Ward said: "Despite a weaker quarter, we believe Kohl's remains one of the long term winners."
US department store retailer Dillard's said it was "disappointed" with its second-quarter performance, after reporting a 13.3% decline in net profit. Net income amounted to $29.9m for the 13 weeks to 1 August, compared to $34.5m in the same period of the prior year. Sales rose 2.6% to $1.51bn from $1.48bn last year. Total merchandise sales edged up 0.5% to $1.47bn from $1.46bn, with comparable store sales also climbing 1%. Gross margin declined 119 basis points year-on-year.
US department store retailer Macy's has lowered its full-year sales guidance after reporting disappointing second-quarter results. Net income amounted to US$217m for the three months to 1 August, down 25.7% from $292m in the same period last year. Sales fell 2.6% to $6.10bn from $6.27bn in the prior year, while comparable store sales were down 2.1% year-on-year. The company blamed the decline on the removal of a major Friends & Family event, planned markdowns due to delayed shipments from the West Coast port slowdown, lower demand in many categories, and a stronger US dollar, which impacted international tourist spending. The company expects sales to fall 1%, compared to its earlier guidance of a 1% increase.
While Stifel analyst Richard Jaffe expects near-term weakness at Macy's, he believes the retailer's strategic initiatives, including the sale of its downtown Brooklyn store to Tishman Speyer, will "play out favourably" in the longer term. "We believe Macy's continued focus on improving the customer shopping experience through both ease of shopping and through a better product assortment, will continue to help the company gain share and drive sales profitably."
Outdoor equipment and apparel business Black Diamond widened its net loss in the second quarter to US$5.4m from $4.4m a year earlier as a result of restructuring costs. Gross margin increased 280 basis points, despite headwinds from foreign currency, while sales were up 7% on a constant currency basis to $35.1m.
Brand management company Iconix Brand Group saw its second-quarter net profit halve, due to lower revenues. Net income amounted to $19.4m for the three months to 30 June, compared to $38.8m in the same period a year ago. Revenues fell 17.2% to $98.5m from $118.4m last year, but included a 1% increase in licensing revenue to $98.5m. Licensing revenue was negatively affected by approximately $3.7m due to foreign exchange rates. Excluding this, licensing revenue rose 5%. Chairman and CEO Peter Cuneo said the company's core underlying licensing business "remains healthy".
Kate Spade & Co
Kate Spade & Co returned to profit during the second quarter, helped by rising sales. Net income reached $8.5m for the three months to 4 July, compared to a loss of $4.4m. Sales increased 5.7% to $281m, with direct-to-consumer comparable sales growing 10%, or 12% excluding e-commerce. Kate Spade North America saw sales rise 13.1%, while international sales declined 17.3%. Adelington Design Group sales plummeted 44.3% to $5m.
Weyco Group saw foreign exchange headwinds drag on second-quarter earnings. Net earnings amounted to $2.1m for the three months to 30 June, compared to $2.5m in the same period last year. Sales, however, rose 2% to $63.9m from $62.9m a year ago. North American wholesale sales grew 7% to $48.1m, while the North American retail segment saw sales fall 5% to $5m.
Companies: Aeropostale Inc, American Apparel Inc, American Eagle Outfitters, Bebe Stores, Belk Inc, Bon-Ton Stores Inc, Calvin Klein Inc, Cato Corporation, Chico’s FAS, Citi Trends Inc, Destination Maternity, Dick’s Sporting Goods, Dillard’s Inc, DSW Inc, Foot Locker Inc, G-III Apparel Group, Genesco Inc, Hudson’s Bay Company, Iconix Brand Group Inc, J Crew Inc, JC Penney Company Inc, Jos A Bank Clothiers Inc, Kate Spade & Co, Kohl’s Corporation, Lululemon Athletica Inc, Tailored Brands Inc , New York & Company, Nordstrom Inc, Oxford Industries Inc, Pacific Sunwear of California Inc, Perry Ellis International Inc, Phoenix Footwear Group Inc, PVH Corporation, Ross Stores Inc, Sears Holdings Corporation, Shoe Carnival, Stage Stores Inc, Stein Mart, Target Corporation, Buckle Inc, Children’s Place Retail Stores Inc, TJX Companies Inc, Urban Outfitters Inc, Wal-Mart Stores Inc, Weyco Group, Zumiez Inc
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