Retailers’ Profits Meet Forecasts
A slew of retailers announced 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 upcoming 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.”
From Wal-Mart Stores Inc. in Arkansas to HomeBase Inc. in Irvine, retailers generally saw their stocks fall in step with their reports of lackluster results.
Wal-Mart, the nation’s largest retailer, reported a 4.1% profit gain for the first quarter, or $1.38 billion, compared to $1.33 billion a year ago--its smallest first-quarter gain in five years.
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.
Shares in Wal-Mart fell following the company’s warnings that double-digit growth won’t return until the second half of its fiscal year. The company’s 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 gain 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. Analysts had expected the company to report a profit shortfall, given low lumber prices and cool spring weather, but the company said cost controls helped boost their results.
HomeBase, 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 to a net loss of $1.1 million a year ago, mostly as a result of charges associated with its repositioning. But its loss of $3.45 a share turned out to be slightly less than its forecast for a loss of $3.50 to $3.75 a share.
The company previously scaled back plans for its new concept stores, saying it would open 42 of its House2Home stores rather than its previous projection of 67 stores. Shares in the company’s stock fell 3 cents, to close at $1.97 on the New York Stock Exchange.
As part of the roll-out, HomeBase on Thursday will launch a $30-million advertising campaign, which includes television spots on “Friends” and “Will & Grace.” One 30-second ad is designed to attract Latinos.
Although it won’t report earnings until Thursday, Michigan-based 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 to $10.10 on the New York Stock Exchange.
Long-suffering J.C. Penney Co. reported a $41-million profit for the first quarter, as compared to heavy losses last year at this time. But the nation’s second-largest department store company, just behind Sears, Roebuck & Co., said the upcoming quarter is likely to swing in the other direction, with losses of 20 to 25 cents per share.
Penney shares fell 86 cents to $20.19 on the New York Stock Exchange.
Other retail chains reported less hopeful results.
Mall jeweler Zale Corp. said its most recent quarter’s earnings were down by more than half, with a $4.8-million profit compared with $10.5 million a year ago, with same-store sales down 7.3%. The company also said it expected to earn almost nothing for the next several quarters, due to broad economic trends and internal problems, such as excess inventories.
Williams-Sonoma Inc., based in San Francisco, surprised financial analyst with an earnings gain in the quarter of $492,000, as the home-furnishings chain got better prices from suppliers on espresso machines, marble-top kitchen tables and other merchandise. Shares in the company’s stock rose 21 cents to close at $30.21 on the New York Exchange.
Discounter TJX Cos., parent of off-price chains T.J. Maxx and Marshalls, saw first-quarter profit fall 5%, after the stores were forced to cut prices in order to maintain sales. Shares in the company’s stock gained 35 cents, closing at $34.25 on the New York Stock Exchange.
Bloomberg News was used in compiling this report.
