Disappointing 1st Quarter for 4 Big Retailers

Four of the nation’s biggest retailers reported disappointing earnings results Tuesday after consumers concerned about growing debts and the slowing economy hit the brakes on spending this spring.

The reports by Wal-Mart Stores Inc., the country’s largest retailer, J.C. Penney Co., Dayton Hudson Corp. and Home Depot Inc. reflects slower consumer spending in the first quarter and signals a weaker year for retailers than had been expected, industry analysts said.

“It was a very bad first quarter,” said Barry Bryant of Ladenburg, Thalmann and Co. “There are too many stores chasing too little demand.”

Bentonville, Ark.-based Wal-Mart said net profit rose 11% to $553.4 million, or 24 cents a share, in the first quarter ended April 30, up from $498.5 million, or 22 cents a share, in the 1994 period.

Sales rose 15% to $20.4 billion from $17.7 billion.

But industry analysts said the earnings were not as strong as investors had expected, noting that Wal-Mart had failed to turn a profit at the Pace Membership Warehouse club stores acquired from Kmart Corp. in 1993, and at Woolco stores in Canada acquired from Woolworth Corp. last year.

Meanwhile, Penney, the fifth-largest retailer, said its profit fell 30% in the quarter and Dayton Hudson, which owns the Target discount chain, said earnings plunged 72%.

“People are a little more cautious than they’ve been in the last few years,” said David Wyss, research director at DRI / McGraw Hill. “The middle two quarters of the year will be the softest.”

Penney said its net income slid to $156 million, or 61 cents a share, from $223 million, or 84 cents a share, a year ago. Sales were little changed at $4.37 billion, compared with $4.35 billion.

The Plano, Tex.-based retailer said it is rejiggering its merchandise mix and combing expenses to cope with the slowdown.

“Because sales were soft, reflecting the consumers’ response to a slowing economy, we are making the necessary adjustments to our merchandise assortments and expense levels,” Vice Chairman James Oesterreicher said.

Penney has cut its outlook for sales growth in the second half, said spokesman Duncan Muir. By planning more conservatively, it hopes to avoid further earnings declines.

“There’s no question consumer spending, as we know from all retailers, is down,” Muir said.

Other factors--sluggish demand for women’s apparel, cold spring weather and intense price competition--have weighed on results at many retailers.

Minneapolis-based Dayton Hudson said its net profit slid to $11 million, or 9 cents a share, from $39 million, or 48 cents a share, in the 1994 period. Sales rose 6% to $4.76 billion from $4.47 billion.

It said profit fell at its department stores and its California-based Mervyn’s division, partly due to merchandise markdowns launched to beef up sales.

But the retailer’s Target division posted a modest rise in profit on a 4% gain in sales at stores open more than one year.

Home Depot Inc., the nation’s biggest retailer of building supplies and home-improvement items, reported earnings of $157.8 million, or 34 cents per share, in the quarter ended April 28, an increase of 13% over $139.7 million, or 31 cents per share, from the same period last year. Sales totaled $3.6 billion, up 24% from $2.9 billion.

The home improvement chain’s earnings were held in check by poor weather during the quarter.

Reflecting disappointment with the results, Penney stock lost $1 to $45.50, Dayton Hudson also fell $1 to $69, Wal-Mart slid 50 cents to $24.125 and Home Depot fell $2.25 to $41.25, all on the New York Stock Exchange.