Retailers’ Profits Meet Forecasts
A slew of retailers announced quarterly earnings that were in line with Wall Street’s modest expectations, but many added warnings about the rest of the year, cautioning that the slowing economy probably will mean disappointing earnings for at least the current quarter.
“There’s a realism that it’s a tough environment,” said Michael P. Niemira, an economist and retail analyst with Bank of Tokyo-Mitsubishi in New York. “So I didn’t really find anything that changes my longer-term views, which are that we’re in for a tough rest of the year.”
Wal-Mart Stores Inc., the nation’s largest retailer, reported a 4.1% profit gain for the first quarter to $1.38 billion, or 31 cents a share, compared with $1.33 billion, or 30 cents, a year ago--its smallest first-quarter gain in five years. Sales rose 12% to $48.1 billion.
The company’s showing was in line with Wall Street’s revised estimates, brought down after the company last month said earnings would be slightly below expectations because of bad weather and greater economic pressures.
Wal-Mart shares fell following the company’s warning that double-digit earnings growth won’t return until the second half of the year. The stock closed down $2.35 to $52 on the New York Stock Exchange.
“Consumer spending appears to be stabilizing at its current levels,” Wal-Mart Chief Executive Lee Scott said on a conference call, noting that the company cut prices to spur sales. “However, hopes for future improvement need to be tempered because of continued layoffs, high gasoline prices and increased utility costs.”
Building-supply chain Home Depot Inc. beat expectations with a 1% earnings gain to $632 million, or 27 cents a share. Sales rose 10% to $12.2 billion, helped by new stores.
Analysts had expected Home Depot to report a profit shortfall, given low lumber prices and cool spring weather, but the company said cost controls helped boost results.
Home Depot shares rose 95 cents to $50.10 on the NYSE.
Irvine-based HomeBase Inc., amid an effort to become a home furnishings seller rather than a home improvement retailer, posted a net loss of $129.6 million for the quarter, compared with a net loss of $1.1 million a year ago, mostly as a result of charges associated with its repositioning. The stock eased 3 cents to close at $1.97 on the NYSE.
Although it won’t report earnings until Thursday, Kmart Corp. warned Tuesday that sales at stores open at least a year could be flat through the second and third quarters as the company remodels. Kmart shares closed down 40 cents at $10.10 on the NYSE.
J.C. Penney Co. reported profit from operations of $35.4 million, or 11 cents a share, down 19% from operating earnings a year ago. Sales were flat at $7.52 billion.
Penney, the nation’s second-largest department store company, just behind Sears, Roebuck & Co., also said the economy’s weakness is likely to mean a loss of 20 cents to 25 cents a share in the current quarter.
Penney shares fell 86 cents to $20.19 on the NYSE.
Mall jeweler Zale Corp. said its most recent quarter’s earnings were down by more than half. It earned $3.5 million, or 10 cents a share, after one-time charges, compared with $10.5 million, or 30 cents, a year ago.
Total sales rose 14% to $411 million, but same-store sales fell 7.3%.
The company also said it expected to earn almost nothing for the next several quarters because of broad economic trends and internal problems, such as excess inventories. Zale shares slid $2.20 to $32.30 on the NYSE.
Williams-Sonoma Inc. surprised analysts with earnings of $492,000, or 1 cent a share, in the quarter, as the home furnishings chain got better prices from suppliers on espresso machines, marble-top kitchen tables and other merchandise. Analysts had expected a loss.
Sales rose 14% to $418 million.
Williams-Sonoma shares added 21 cents to $30.21 on the NYSE.
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Bloomberg News was used in compiling this report.
