Week two of America’s retailing reporting season and the fallout is almost as confusing as the first week was. In fact apart from some isolated examples such as Home Depot, TJX Cos and Walmart, the news was gloomy.
In fact the report from TJX Cos (which owns the TJ Maxx and Marshalls off price chains) stood out – not only for the figures, but for the optimism from management who talked about wanting to expand the number of stores in its chains by the thousands in coming years.
And a sharp improvement in its US operations (run by former Woolies executive, Greg Foran) helped the giant Walmart beat the retailing gloom in the first quarter.
The world’s largest retailer said same store sales rose 1% in the three months to end of April, more than twice the 0.4% in market forecasts and well ahead of the performance of a host of rival operators in department stores.
The world’s largest retailer said same store sales rose 1% in the three months to end of April, more than twice the 0.4% in market forecasts and well ahead of the performance of a host of rival operators in department stores.
The news sent shares in Walmart up 9% in one of its best daily performances for years.
Revenue rose 0.9% in the quarter to $US115.9 billion. Excluding the effect of the strong dollar, which weighed down the value of its intakes from its overseas operations, revenue was up 4% at $119.4 billion. Net income for the first quarter of fiscal 2017 was $US3.1 billion, down 7.8% from the year-ago period, but again better than expected.
Sales did better in Canada and Mexico, but not in the UK where its Asda supermarket chain experienced a seventh quarter of falling sales. The improved performance in the US stores – which account for 60% of group sales each quarter – drove the better sales performance.
Foran’s performance in the UK stores business of Walmart confirms the feeling of many Australian analysts that he should have been running Woolworths instead of Grant O’Brien,who was replaced last year over the Masters hardware disaster and weak trading in the company’s core supermarkets and liquor businesses in Australia.
Shares in Target fell for a second session overnight after the retailer disappointed with its latest quarterly report and a weaker than expected sales performance.
The retailers shares fell more than 1% overnight Thursday, on top of the 7.6% slide on Wednesday in the wake of the quarterly report’s release.
The market was looking for a 1.6% per cent rise in like-for-like sales for the three months to the end of April. Target reported a 1.2% increase, but also warned that it was facing “an increasingly volatile consumer environment.”
As a result it now expects same-store sales for the second quarter to be flat to down as much as 2%, a forecast that upset some analysts.
First quarter revenue came in at $US16.19 billion, down from $US17.12 billion a year earlier, following the sale of its pharmacy business to CVS last year.
Staples Inc., whose $US6.3 billion merger with Office Depot Inc. was blocked last week by a US federal judge, said profit fell 30% as same store sales fell in the latest quarter.
Sales at existing stores fell 4% in the quarter. Comparable sales, which includes stores and Staples.com but excludes currency impacts, declined 3%. Sales in North America fell 5.2% to $US2.25 billion. Revenue slipped 3.1% to $US5.1 billion.
In April, Office Depot reported weaker-than-expected first-quarter profit and revenue as sales declined. The company blamed the prolonged merger talks for the weak results.
Apart from Walmart’s better than expected performance, the two standout reports came from Home Depot on Tuesday and TJX Cos, (parent of off-price chains T.J. Maxx and Marshalls), which both posted another quarter of rising profits and sales.
Sales at existing Home Depot stores rose 6.5% in the three months ended May 1, TJX reported a 7% jump in sales at existing stores in the April quarter and raised its forecasts for the year.
“Long term, we see the potential to grow to 5,600 stores with just our current chains in just our current markets alone,” TJX CEO, Ernie Herrman said. That’s equal to more than 50% store growth, or almost 2,000 additional stores on top of the company’s current base, he said.
These results stand in contrast to retailers like Macy’s, Dillard’s, Kohl’s Corp, Nordstrom and J.C. Penney Co. which reported sluggish sales last week. Those department stores reported steep drops in apparel sales and resorted to discounting to move unsold merchandise in the quarter, in part to compete with Amazon and rivals such as TJ Maxx.
TJX said comparable store sales rose a strong 7% in the quarter, while headline sales rose 10% to $US7.5 billion in the quarter. Net profit rose 10% to $US508 million in the quarter.
For the first quarter, Home Depot reported a profit of $US1.8 billion, up from $US1.58 billion a year earlier. Revenue climbed 9% to $US22.76 billion.
For 2016, Home Depot expects revenue growth of 6.3%, up from its previous guidance for revenue growth of 5.1% to 6%. Same-store sales are anticipated to rise about 4.9%.
