2nd-Quarter Net Jumps at Penney and Wal-Mart
J.C. Penney Co. and Wal-Mart Stores Inc., giant retailers offering moderately priced merchandise, both said Tuesday that their second-quarter earnings grew substantially. Some other retailers, however, reported sales declines or flat to moderate profits.
The strong showing by Penney and Wal-Mart in an otherwise lackluster field suggests that consumers remain skittish about the economy and are trying to stretch their dollars.
Dallas-based Penney, which said earnings more than doubled, apparently benefited from a shift in its merchandise mix to de-emphasize higher priced goods. For the quarter ended July 25, earnings jumped to $80 million, or 61 cents a share, from $31 million, or 19 cents a share, in the same period a year ago. Sales for the quarter were up 9.6% to $3.8 billion from $3.5 billion a year ago.
Penney in the late 1980s tried to develop an upscale image--remodeling stores and adding more expensive merchandise. But the strategy was unsuccessful. The chain’s resurgence began last year when it began to move back to its practice of offering moderately priced goods, said Linda Kristiansen, an industry analyst at Wertheim Schroder in New York. “They’ve been doing well because they’ve lowered prices while improving quality of their selections in name-brand apparel,” Kristiansen said.
“Penney alienated its shoppers when it went upscale,” said Richard Nelson, an analyst at Chicago-based Duff & Phelps. “In 1992, they’ve balanced things just right. With consumers growing more value-conscious, they should continue to do well.”
Penney’s chairman, William Howell, said sales of fall merchandise were particularly good late in the quarter and predicted favorable results for Penney for the rest of the year.
Wal-Mart, which has grown rapidly to become the nation’s largest retailer, said it had earnings of $420.5 million, a 22% gain from profit of $345.9 million a year ago. The Bentonville, Ark.-based chain said earnings equaled 37 cents a share, compared to 30 cents in the previous period. Sales rose to about $13.03 billion from about $10.34 billion a year ago.
Wal-Mart said it opened 20 new Wal-Mart stores and 18 Sam’s Club outlets during the period, providing 6 million square feet of new retail floor space.
The performance of other major retailers during the quarter was mixed:
* Seattle-based Nordstrom Inc. said that sluggish apparel sales caused a 16% drop in its second-quarter earnings to $41.65 million, or 51 cents a share, from $49.86 million, or 61 cents a share, in last year’s second quarter. Revenue was up 5.3% to $951.62 million from $904.08 million.
* Limited Inc. of Columbus, Ohio, reported flat earnings of $80.1 million, or 22 cents a share, on sales of $1.49 billion. That compared to $79.2 million, or 22 cents a share, on sales of $1.38 billion in the 1991 period. However, the company said it is optimistic about the fall because of early customer acceptance of fall fashions.
* Ann Taylor Stores Corp. said net income fell to $624,000, or 3 cents a share, from $829,000, or 4 cents a share, a year ago. Sales at the New York-based women’s specialty store rose to $112.4 million for the period from $101.3 million.
* United Retail Group Inc. of Rochelle Park, N.J., said profit rose 35% to $4.3 million from $3.2 million a year ago, while sales rose 22% to $86.7 million from $70.9 million. The company operates retail chains for large-size women’s clothing, including Sizes Unlimited, the Avenue and 16 Plus.
Retail Results
Some price-conscious retailers posted big earnings increases in the second quarter, while the picture was mixed for the rest of the industry. Here are earnings for selected retailers and comparisons to the second quarter of 1991. Figures are in millions of dollars.
1992 2nd qtr. Change Retailer earnings from 1991 Sears, Roebuck $345.8 +15.5% J.C. Penney Co. $80.0 +158.0% Wal-Mart Stores $420.5 +22.0% Nordstrom Inc. $41.7 -16.0% Limited Inc. $80.1 +0.7% United Retail $4.3 +35.0% Dollar General $6.7 +71.0% May Dept. Stores $95.0 +16.0%
Source: Company reports
