Profits Drop at Several Big Retailers in Quarter

Several of the nation’s major retailers, as expected, are reporting big drops in profit for the second quarter from a year earlier.

J. C Penney, the third-largest retailer, said Tuesday that its profit fell 40.4% from a year ago, while fourth-ranked Federated Department Stores said its profit dropped 28.6%.

No. 5 Dayton-Hudson said its profit edged up 2.25%, and No. 9 May Department Stores said its profit was flat.

“They were as bad as expected,” said Jeffrey Edelman, a retail analyst with Dean Witter Reynolds.

“The profit performance is so poor because sales were well below trend and well below expectations during the entire quarter. Not only did they have to unload heavy inventory at low margins, but the volume was not sufficient enough to offset higher costs,” Edelman said.

New York-based Penney said its net income for the three months ended July 27 came to $30 million, compared to $49 million for the period last year.

Chairman William Howell blamed the results on smaller gross margins as a result of lower sales and higher markdowns and promotional activity.

Revenue for the quarter edged down 1.4% to $3.014 billion from $3.058 billion.

For the first half of the retail fiscal year, Penney’s net income fell 32.3% to $80 million from $118 million a year earlier. Revenue inched up 0.1% to $5.816 billion from $5.81 billion.

Cincinnati-based Federated said its second-quarter profit fell to $25 million from $35 million a year ago. Revenue rose 4.6% to $2.2 billion from the $2.1 billion reported for the 1984 period.

Federated Chairman Howard Goldfeder said: “Second-quarter results were disappointing. Slower-than-expected growth in overall demand for department store-type goods resulted in intensified competitive pressures and in sales that were below expectations in the company’s general merchandise divisions. These unfavorable developments contributed to a decline in merchandise margins.”

In the first six months of the year, Federated’s profit dipped 3.4% to $68.4 million from $70.8 million in 1984. Revenue increased 5.9% to $4.38 billion from $4.14 billion.

Federated operates Bullock’s and I. Magnin in California.

Minneapolis-based Dayton-Hudson said its second-quarter profit came to $39.98 million, up from last year’s $39.1 million. Revenue rose 10% to $1.96 billion from $1.78 billion.

Kenneth A. Macke, chairman and chief executive, said strong second-quarter operating profit growth at its Mervyn’s division was offset by declines at the corporation’s other three business segments--Target discount stores, department stores and specialty merchandisers.

For the first six months, Dayton-Hudson’s net earnings totaled $73.44 million, compared to $67.5 million in the first half of last year. Revenue totaled $3.78 billion, compared to $3.4 billion.

St. Louis-based May, which operates May Co. California, said its second-quarter profit came to $37.8 million, up slightly from the $37 million that it reported a year earlier. Revenue increased to $728.2 million from $701.4 million.

For the first six months, May had a profit of $71.3 million on revenue of $1.43 billion. In the same period a year ago, it had a profit of $64.5 million on revenue of $1.345 billion.

For detailed data and results of other companies, please see tables, Page 15.