Carter Hawley Profit Increases 26%

Carter Hawley Hale Stores, parent of the Broadway and Neiman-Marcus, reported Monday that improved sales of its profitable private-label merchandise and better inventory control resulted in a 26% rise in first-quarter earnings over the same period last year.

Meanwhile, K mart, the nation’s second-largest retailer, cited successful new merchandising programs and cost controls in reporting a 56.6% jump in first-quarter earnings. For the period ended April 30, K mart reported first-quarter net income of $91.6 million, up from $58.5 million in the same period last year. Sales rose 5% to $5.21 billion.

The Gap, a specialty retailer based in San Bruno, Calif., also showed a dramatic improvement in continuing operations. It reported first-quarter income from continuing operations of $10.2 million, compared to a loss from continuing operations of $224,000 for the same period last year.

Los Angeles-based Carter Hawley had record net income of $14.6 million in the quarter ended May 3, up from $11.6 million.

Excluding revenue from Holt Renfrew & Co., a Canadian division that was sold last month for $29.7 million, sales for the first three months rose 3.7% to $867 million, also a record for the period.

David Jackson, an analyst with Morgan, Olmstead, Kennedy & Gardner in Los Angeles, called the showing “better than expected.”

Both he and company officials said the improvement resulted primarily from two factors: rising sales of the company’s private-label products, which afford higher markups, and tighter controls on inventories, which result in fewer markdowns. Those factors contributed to a sharp rise of 1 percentage point in gross margins.

“Here’s a company that analysts love to hate . . . and yet they’re showing substantial improvement,” Jackson said. “Maybe this is the beginning of a significant turnaround.”

In the past, some analysts have roundly criticized the company for promising better results than it delivered. However, Jackson noted that the company has managed to cut overhead costs and improve gross margins during a period of sluggish sales. “Other retailers are not coming in with that sort of improvement,” he said.

Spokesman Bill Dombrowski said a computer system, installed and updated over the last five years at a cost of $150 million, has enabled the company’s buyers to keep tighter control over inventories.

The Gap continues to offer evidence of one of the most dramatic turnarounds in retailing history. This year’s first-quarter gain contrasted with a quarterly net loss last year of $1.1 million, reflecting a loss of $893,000 from the Pottery Barn, which is up for sale.

The Pottery Barn’s results were discontinued as of last Feb. 1, and the Gap is negotiating with several possible buyers, said Maurice W. Gregg, executive vice president and chief financial officer.

First-quarter sales from continuing operations, which include the highly successful Gap and Banana Republic stores, increased 51.3% to $160 million.