Retailers' profits mixed
Home Depot, Target post higher profits while Penney, Staples earnings fall
NEW YORK (CNNfn) - In what is proving to be a challenging fiscal second quarter for retailers, Home Depot Inc. and Target Corp. met earnings estimates Tuesday while profits fell at J.C. Penney Co. and Staples Inc.|
A slowing economy driven by rising interest rates and record-high oil prices has led to decreased consumer spending, experts said. Many retailers continue to post profits and will continue to do so going forward, but not at the breakneck pace of the last year or two.
Home Depot, a component of the Dow Jones industrial average, earned $838 million, or 36 cents a diluted share, for the period ended July 30. That was in line with the forecasts of analysts surveyed by earnings tracker First Call. The results rose 23 percent from the $679 million, or 29 cents a diluted share, the company posted a year earlier.
Sales at the Atlanta-based chain rose 21 percent to $12.6 billion. Sales at stores open at least a year, a closely watched measure known as same-store sales, gained 6 percent in the period.
Ursula Moran, an analyst with Sanford C. Bernstein, said Home Depot posted a solid -- if not spectacular -- quarter, considering the slowing economy. Contrary to popular opinion, Moran said earnings for the home improvement retailer and its rival, Lowe's (LOW: Research, Estimates), are not necessarily tied to new construction. Lowe's reported higher results, in line with expectations, after the bell Monday.
Poor weather and inventory management problems related in part to the launch of its new appliances section dampened the quarter.
"They did very well considering," Moran said. "This year's weather was about as unfavorable as it could have been. It's an obvious excuse for retailers, but when you're selling lumber and building materials and other things people use outdoors, rain is not a good thing."
Many sales come from consumers out to renovate their existing homes.
For the first six months of its fiscal year, Home Depot earned $1.5 billion, or 62 cents a diluted share, up from $1.2 billion, or 50 cents a share, a year earlier. Year-to-date revenue rose to $23.7 billion from $19.4 billion.
Moran predicts a solid, but not spectacular, second half for the company.
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Shares of Home Depot (HD: Research, Estimates), which were up sharply Monday ahead of the results release, fell in early afternoon trading Tuesday, dropping 4-3/8 to 54-5/8.
Target hits its target
Department store chain Target met second-quarter earnings forecasts and said it is on track to meet earnings growth goals going forward.
The Minneapolis-based company, which last year displaced J.C. Penney as the nation's fourth- largest retailer, earned $257 million, or 28 cents a share, excluding special items in the period ended July 29 -- in line with the forecasts of analysts surveyed by earnings tracker First Call.
The company earned $228 million, or 24 cents a share, in the year-earlier period.
Revenue rose 7.3 percent to $8.3 billion, driven by a 9.9 percent increase at its core Target stores division. But its other divisions, including Mervyn's stores and its department stores, had lower revenue in the period. Same-store sales rose 2 percent.
Shares of Target (TGT: Research, Estimates) lost 2-1/16 to 27-7/8 in Tuesday trading.
J.C. Penney edges past forecast
J.C. Penney, which is closing some department and drug stores, said its earnings excluding special items were $11 million, or 1 cent a share, down from $39 million, or 12 cents a share, a year earlier. Analysts surveyed by First Call forecast breakeven results for the period.
Including special items, the company posted net income of $23 million, or 6 cents a share, compared with $39 million, or 12 cents a share, a year earlier.
The operator of JCPenney department stores and the Eckerd Drugs chain saw revenue edge up to $7.4 billion from $7.3 billion a year earlier. Penney store and catalog sales slipped 1.5 percent to just under $4.0 billion, while Eckerd sales gained 5.3 percent to $3.1 billion.
For the first six months, Penney posted a net loss of $95 million, or 42 cents a share, compared with net income of $206 million, or 73 cents a share, a year earlier. Year-to-date revenue rose 2 percent to $15.1 billion.
Shares of J.C. Penney (JCP: Research, Estimates) fell 1-11/16 to 16-1/4 in trading Tuesday.
Staples meets raised forecasts
Office supply retailer Staples Inc. saw profits slip from the year-earlier period as it met recently raised forecasts.
The company, the nation's second-largest office supply retailer after Office Depot (ODP: Research, Estimates), earned $42.6 million, or 10 cents a share, for the period ended July 29, including its loss from Internet operations. That's in line with the First Call forecast, which was raised from 9 cents a share last Friday after statements from the company earlier in the week.
The company said its core operations produced net income of $44.6 million, but that it lost $2.0 million from its Internet operations in the period. The company said it would have earned 13 cents a share without the Internet loss. Year-earlier earnings were $52.7 million, or 11 cents a share.
The Framingham, Mass.-based company said comparison with year-earlier results is difficult because of the rollout of Office 2000 and Microsoft Network Internet store promotions in the prior year.
Revenue gained 20 percent to $2.2 billion. Same-store sales, combined with sales at its Internet site, rose 10 percent in the period.
For the first six months, Staples reported net income of $86.7 million, down from $103.1 million a year earlier. Revenue rose to $4.8 billion from $3.9 billion.
Shares of Staples (SPLS: Research, Estimates) lost 1-1/4 to 16-7/8 in
Williams-Sonoma slips past estimates
Home-products retailer Williams-Sonoma said Tuesday it beat Wall Street's second-quarter estimates by a penny a share, thanks to a 30 percent sales increase. However, like other retailers, the company saw earnings dip from the year-ago quarter.
For the quarter ended August 1, the San Francisco-based chain, which also owns Pottery Barn, Pottery Barn Kids, Pottery Barn Bed & Bath, Hold Everything and Chambers stores, reported net earnings of $5.1 million, or 9 cents a share, compared with $6.9 million, or 12 cents a share, in the year-ago quarter.
Results include a one-time gain of $2.4 million, or 4 cents a share, from the company's sale of the Gardener's Eden Catalog business.
Excluding the gain, the company reported second-quarter earnings of 1 cent a share, the company said.
Analysts polled by First Call expected earnings of 8 cents a share.
Sales for the quarter increased to $344 million from $264 million in the year-earlier period.
Chairman and CEO W. Howard Lester attributed the better-than-expected results to strong sales, particularly in direct-to-consumer sales.
Shares of Williams-Sonoma (WMS: Research, Estimates) gained 3/8 to 16-1/2 in late trading Tuesday.
BJ's Wholesale clubs expectations
Natick, Mass.-based BJ's Wholesale Club Tuesday reported second-quarter net income of $31.2 million, or 42 cents a share, compared with net earnings of $25.8 million, or 34 cents a share, in the year-ago quarter.
That's 2 cents ahead of analysts' consensus forecast of 40 cents a share, according to First Call.
Net sales for the quarter increased 16 percent to $1.2 billion from $1 billion in the year-earlier period.
The company also announced the repurchase of 1.4 million shares of stock at an average cost of $29.91 for a total of $42.6 million.
Jack Nugent, BJ's president and CEO, said the combination of strong sales and cost management contributed to the strong quarter.
Shares of BJ's (BJ: Research, Estimates) were up 1/16 to 35-5/16 Tuesday.