Retail earnings looking good
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August 18, 1998: 11:58 a.m. ET
Strong economy gives retail sector a boost, but J.C. Penney falls behind
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NEW YORK (CNNfn) - Strong second- quarter earnings reports from the nation's leading retailers suggest consumers are beginning to spread the wealth evenly among specialty, discount and department stores alike.
Limited Inc. Tuesday posted net income before special gains of nearly $32 million, or 13 cents per diluted share, for the fiscal quarter ended in August. Those figures are up 20 percent from earnings of $27.6 million, or 10 cents a share, in the year-ago quarter. The results were in line with analyst estimates.
Overall sales for the quarter grew 3 percent to $2.1 billion and same-store sales climbed 6 percent.
During the quarter, the Limited recorded a gain of $1.65 billion, or $6.79 per diluted share, from the sale of its Abercrombie & Fitch stores.
Shares of Limited (LTD) were trading unchanged midday Tuesday on the New York Stock Exchange at 26-9/16.
Separately, Talbots Inc. posted net profits of $1.3 million, or 4 cents a share, for the second quarter ended Aug. 1, 2 cents ahead of Wall Street estimates. The numbers, buoyed by strong sales growth and shrinking clearance sales, reverse the company's loss last year of $11.5 million, or 35 cents a share.
Shares of Talbots (TLB) gained 11/16 to 26-7/8 in early trading on the Big Board.
And general merchandise retailer Dayton Hudson (DH) reported a second-quarter profit of 36 cents a share, beating the consensus estimate by a penny.
Analysts say the strength of second-quarter earnings reports, including those released earlier by Gap, Wal-Mart, Lowe's and KMart paints a picture of overall health for the retail sector. And, they say, that strength shows no sign of slowing down.
"They all had pretty good numbers this quarter," said Argus Research analyst David Toung. "It's very simple: people have money. Jobs and the economy are doing well."
He added retailers that have manufacturing operations in Asia, like the Gap, are getting a break in costs since the Asian currency has been weak.
Gap's same-store sales, coincidentally, were up 20 percent for the quarter.
Toung said he expects the wave of consumer confidence and steady spending patterns to continue at least through the remainder of the year.
Last week, Federated Department Stores posted a 60 percent jump in second-quarter profits, walloping Wall Street estimates by 16 cents per share.
The Cincinnati-based owner of Bloomingdale's, Macy's and Burdine's, reported net income of $107 million, or 47 cents per diluted share.
Analysts expected Federated to earn 31 cents per share.
J.C. Penney profits sink
But the rising tide of retail spending did not lift all boats.
J.C. Penny Co. Inc. Tuesday reported sharply lower second-quarter net earnings of $27 million, or 8 cents per share, due largely to a special one-time, after-tax charge of $70 million and weaker-than-expected sales.
Before the charge, earnings were 35 cents a diluted share, in line with estimates by analysts polled by First Call.
In the year-ago quarter, the company posted profits of $90 million, or 32 cents a diluted share.
Sales during the quarter were $6.76 billion, compared with $6.65 billion last year.
"As previously indicated, our results for the second quarter were affected by weaker-than- expected sales in JCPenney stores and catalog," said James E. Oesterreicher, chairman and chief executive of the company. "Both sales and operating income of Eckerd Drugstores improved before the integration charges."
Shares of J.C. Penney (JCP) were off 15/16 at 56-3/16 on the New York Stock Exchange Tuesday morning.
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Limited Inc.
JCPenney
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