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Retailers burn up 3Q
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November 16, 1999: 5:10 p.m. ET
Healthy economy spurs strong sales as customers get out there and spend
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NEW YORK (CNNfn) - The American buying binge showed little sign of slowing down Tuesday as strong sales pushed several retailers well into the profit zone.
Many of the major retailers beat Wall Street's earnings expectations and analysts felt the good news will continue right into the holiday season.
"Consumers have been and continue to be on a spending spree and that has benefited most retailers," said Kurt Barnard, president of Barnard's Retail Trend Report, a forecasting firm in Montclair, N.J. "The universe has been very retail friendly."
Barnard said the companies that missed estimates, such as J.C. Penney, were rare.
"Penney is a chronic under-performer," he said. "If you didn't do well in this climate, you stuck out like a sore thumb."
Barnard said all this bodes well for Christmas, which he said will be very robust for retailers.
Home Depot
Home Depot Inc. (HD), one of the new components of the Dow Jones industrial average, reported record fiscal third quarter earnings Tuesday, exceeding estimates for the period.
For the quarter ended Oct. 31, the Atlanta-based hardware giant had net income of $573 million, or 37 cents a diluted share. Analysts surveyed by First Call had been looking for 35 cents a share in the period. The profit is a 46 percent improvement from the $392 million, or 26 cents a share, it earned a year earlier.
The company said the gain was due to cost management and strong sales for the quarter, driven by a 20 percent increase in customer transactions and a 7 percent increase in the average sale per transaction.
Total sales were up 28 percent to $9.88 billion in the quarter, and same-store sales increased a strong 10 percent.
For the first nine months of its fiscal year, the company had net income of $1.7 billion, or $1.13 a diluted share, compared to $1.2 billion, or 79 cents a share, a year earlier. Revenue rose to $29.26 billion for the nine months from $22.96 billion a year earlier.
The nation's largest home improvement retailer displaced Sears, Roebuck & Co. (S) as a component of the much-watched Dow Jones industrial average.
J.C. Penney Co.
J.C. Penney Co. (JCP), the nation's fourth-biggest chain store operator, reported a 24 percent drop in its third-quarter earnings, a reflection of slower sales at its department store and catalog businesses.
Income for the quarter ended Oct. 30 fell to $142 million, or 51 cents per diluted share, from $186 million, or 68 cents a share, a year earlier. That still topped analysts' estimates by a penny a share, according to the research firm First Call Corp. Revenue rose 5.7 percent to $8 billion.
Much of the decline stemmed from slower sales at the company's more established stores and lackluster sales in the catalog division, the company said. Comparable sales for department stores decreased 3 percent while catalog sales were flat for the quarter, it said.
"The third quarter was challenging for our core businesses," said James Oesterreicher, chairman and chief executive officer. "Department store sales continue to face stiff competition, and as we tried to hold the line on promotions to maintain margins, same-store sales were hurt."
For the first nine months of its fiscal year, J.C. Penney earned $348 million, or $1.24 a share, compared to $387 million, or $1.42 a share, in the prior-year period. The nine-month results include the effects of after-tax drugstore charges of $73 million, or 28 cents a share, compared to $70 million, or 27 cents per share, in 1998.
J.C. Penney operates nearly 1,150 J.C. Penney department stores in all 50 states, Puerto Rico and Mexico. In addition, the company operates 28 Renner department stores in Brazil.
Staples Inc.
Office supply retailer Staples Inc. (SPLS) reported a 34 percent rise in its third-quarter earnings, a penny more than analysts' expectations, reflecting an improved performance by its retail stores and delivery business.
Net income for the quarter ended Oct. 30 rose to $92.5 million, or 20 cents per diluted share, from $69.2 million, or 15 cents, in the year-earlier period. Analysts polled by research firm First Call Corp. had anticipated earnings of 19 cents a share.
Revenue rose 26 percent to $2.4 billion. Sales at stores open a year or more rose 9 percent worldwide and 10 percent in North America.
The latest quarter includes a $2.84 million loss from its Staples.com unit, compared to a $99,000 loss in the year-earlier period. But company officials are still pleased by the progress online.
"Our Internet business has surpassed our own expectations this quarter and we are on our way to becoming the online destination for small business -- the place where business does business," said Staples Chief Executive Thomas G. Stemberg. On Nov. 9, Staples shareholders approved the company's plans to create a separate Staples.com stock to track the performance of the company's e-commerce businesses.
Staples.com stock reflects the operations of the company's three e-commerce sites -- www.staples.com, www.quillcorp.com and www.stapleslink.com.
That division recorded revenue above $24 million for the third quarter, up nearly sixfold from the roughly $4 million it reported during the same period a year earlier. For the first nine months, Staples earned $195.6 million, or 42 cents a diluted share, compared to $114.1 million, or 27 cents, a year earlier. Sales rose to $6.3 billion from $5.1 billion.
Tiffany & Co.
Strong sales, especially in the U.S. and Japan, helped jewelry and specialty retailer Tiffany & Co. (TIF) eat Wall Street for breakfast with a record increase in third quarter net earnings.
The New York-based company said its earnings rose 81 percent to $22 million, or 29 cents per share, compared to $12.1 million, or 17 cents per share, in the year-ago period. Analysts polled by First Call had expected Tiffany to post earnings of 25 cents per share.
Sales rose 28 percent to $322.7 million, with U.S. retail sales rising 28 percent to $161.5 million. International retail sales rose 31 percent to $132.9 million in the third quarter.
Comparable store sales rose 22 percent in the third quarter and 15 percent in the year-to-date period.
For the nine month period ending Oct. 31, net sales rose 24 percent to $902 million. Net earnings rose 66 percent to $61 million, or 82 cents per diluted share.
Dayton Hudson Corp.
Dayton Hudson Corp. (DH), the nation's fifth largest retailer, was another Street beater, reporting a 32 percent increase in second quarter earnings, thanks largely to strong results at its Target stores.
The Minneapolis-based company posted a third quarter profit of $241 million, or 52 cents per diluted share, before a charge of $9 million or 2 cents per share, compared to $183 million or 39 cents per diluted share last year, excluding a $1 million extraordinary charge.
Analysts had expected the company to post a profit of 50 cents per share.
Total revenue increased 9.9 percent to $8 billion.
For the nine-month period, diluted earnings per share were $1.42, compared to $1.09 in 1998, before a 3 cent extraordinary charge in the current period, and a 1 cent extraordinary charge in 1998, for debt repurchase.
Net earnings were $663 million, up 29 percent from the first nine months of 1998, before a $13 million extraordinary charge in 1999 and a $3 million extraordinary charge in 1998 for debt repurchase.
Target's pre-tax profit in the quarter increased 40 percent to $411 million, compared to $293 million in the same period in 1998. Target's total revenues for the quarter increased 13.9 percent and comparable-store sales increased 7.1 percent.
The Limited Inc.
The Limited Inc. (LTD) did not limit itself in the earnings department as the apparel chain beat Wall Street's third quarter expectations.
The Cleveland, Ohio-based company posted earnings of $41 million or 18 cents per share on an adjusted basis, compared to $35 million, or 17 cents, in 1998. Analysts had expected a 15-cent per-share profit.
Sales rose 3 percent to $2.06 billion.
Sales rose 6 percent in the quarter excluding sales from Too Inc. (TOO), a retail store targeting girls that was spun off from the company in August 1999. Same store sales rose 9 percent, the Limited said.
The adjusted earnings exclude a gain and taxes related to the sale of the company's 60 percent interest in Gaylan's Trading Co. in 1999 and the Too spinoff.
The company's brands include Express, Lerner New York, Lane Bryant, Structure and Henri Bendel in addition to the Limited Stores line.
During a conference call with analysts to discuss the quarter, the company's vice president for investor relations, Tom Katzenmeyer, said the company is pleased with the progress it has made in the earnings of the apparel operation but that more needs to be done.
For the fourth quarter, he said, "We will be deliberate and disciplined with inventories which will result in lower comps" -- comparable store sales.
For the nine months ending Oct. 31, the company reported actual net sales of $6.43 billion, compared to $6.09 billion in the year ago period. Income rose to $132 million or 57 cents per share, compared to $87 million or 37 cents in the year ago period.
--from staff and wire reports
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