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News > Companies
Leading retailers' 3Q in line
November 14, 2000: 4:52 p.m. ET

Wal-Mart, Home Depot meet target; analysts cautious on holiday sales
By Staff Writer John Chartier
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NEW YORK (CNNfn) - The Grinch is snarling down on Main Street, but whether he descends from his cave to snatch holiday sales remains to be seen.

Several of the nation's biggest retailers reported third-quarter results in line with estimates Tuesday, but nearly all have seen less robust sales than a year ago, due to higher oil prices, rising interest rates and heavy consumer debt. Many are being cautious about the crucial holiday season sales as third-quarter earnings results confirm their fears -- people are spending less money.

If that trend continues, analysts said, the holiday season is likely to be highly competitive with lots of low-margin promotional sales that eat away at profits. That's good for shoppers, but bad for business and the economy.

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  There's no doubt the retail environment is sluggish. It's bordering on awful  
     
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  Aram Rubinson
Retail analyst
UBS Warburg
 
"There's no doubt the retail environment is sluggish. It's bordering on awful," said Aram Rubinson, a retail analyst with UBS Warburg. "The number of bombs that are being dropped in retail, there's no shortage, but I'm getting a little bit hopeful that with each bomb it brings us closer to the end."

Kurt Barnard, president of Barnard's Retail Trend Report, said the economic slowdown "plays itself out on Main Street U.S.A. in the form of muted retail sales."

Wal-Mart, the No. 1 U.S. retailer, said earnings for the quarter ended Oct. 31 rose to $1.4 billion, or 31 cents a share, from $1.3 billion, or 29 cents a share, a year earlier. Sales jumped 13 percent to $45.7 billion from $40.4 billion. The results matched Wall Street forecasts, and the company said sales were less robust than a year ago.

Home Depot, the country's biggest hardware retailer, reported third-quarter earnings of 28 cents a share, matching lowered forecasts on Wall Street and exceeding the 25 cents a share earned in the year-earlier quarter. Sales rose 17 percent to $11.5 billion.

J.C. Penney, the No. 5 retailer overall, reported a third-quarter net loss of $30 million, or 12 cents a share, compared with earnings of $142 million, or 51 cents a share, a year ago. Analysts had forecast a loss of 14 cents a share, according to First Call, which tracks Wall Street forecasts. Including one-time charges, the company reported a net loss of 15 cents a share.

Sales at stores open at least a year, a closely watched measure known as same-store sales, declined 3.7 percent in the quarter while total sales slipped to $7.7 billion from $7.8 billion in the year-earlier quarter.

After-hours earnings mixed

One retailer that edged past expectations is department store operator Kohl's Corp., which reported results after the market closed Tuesday.

The company earned $76.7 million, or 23 cents a diluted share, in the third quarter. That was 1 cent a share better than First Call forecasts and above the $53 million, or 16 cents a share a year earlier.

Revenue for the Menomonee Falls, Wis.-based chain also topped expectations, rising to $1.44 billion from $1.10 billion a year earlier. Analysts were looking for revenue of $1.40 billion in the period.

Shares of Kohl's (KSS: Research, Estimates) gained $2.94 to $52.69 in trading Tuesday ahead of the report.

Intimate Brands was another retailer to report improved results after hours Tuesday. The owner of Victoria's Secret and Bath & Body Works earned $43.2 million, or 9 cents a share, in line with First Call's forecast and up slightly from the $38.4 million, or 8 cents a share, reported a year earlier.

Revenue in the third quarter, typically the weakest period for the company, was a bit weaker than expected. Sales rose to $925.1 million in the third quarter from $814.2 million a year earlier, but analysts were looking for revenue of $931.7 million.

However, Reuters reported that company executives told analysts that fiscal fourth-quarter revenue would come in the $2.07 billion to $2.1 billion range, edging past the First Call forecast of $2.06 billion for the key period.

Shares of Intimate Brands (IBI: Research, Estimates) lost 63 cents to $22.81 in trading Tuesday ahead of the report.

Luxury retailer Saks Inc. missed third-quarter forecasts, as it reported earnings, before special items, of $1.0 million, or 1 cent a share, down from $31.6 million, or 22 cents a share, a year earlier. Analysts were expecting a drop in profits but were still looking for a profit, before special items, of 3 cents a share.

The company said it believes it should be able to meet current fourth-quarter forecasts of 84 cents a share, although its guidance was qualified by saying it needed to generate modest same-store sales growth and better margins to hit that target.

With special items, the company reported a loss of $8.1 million, or 6 cents a share, compared with net income, including charges, of $25.9 million, or 18 cents a share, a year earlier.

The company blamed a difficult sales environment and extraordinary markdowns related to spring and summer merchandise clearance activities, along with startup costs from its online selling efforts.

Overall sales slipped to $906.5 million from $927.5 million a year earlier, while same-store sales fell 2.5 percent in its department stores.

Shares of Saks (SKS: Research, Estimates) gained 44 cents to $9.69 in Tuesday trading ahead of the after-hours report.

Wal-Mart sales growth slows

In earnings reports early in the day Tuesday, Wal-Mart reported that same-store sales rose a healthy 4.9 percent in the third quarter.

graphicLooking forward, Wal-Mart CEO Lee Scott said he expects a good holiday season even though sales are slower than in previous quarters. "The holiday season usually improves consumer confidence, and we are looking for a good Christmas," he said in a recorded message. "Comparable-store sales should be in the lower middle to lower mid-single digits, below last year's levels of growth."

Scott said customer traffic has slowed since the beginning of the year and that inventories were up 11.6 percent.

Shares of Wal-Mart  (WMT: Research, Estimates), a component of the Dow Jones industrial average closed up $1.56 to $46.88 Tuesday.

Home Depot lumbers along

Atlanta-based Home Depot's 28 cents a share earnings matched lowered forecasts. The No. 1 home improvement retailer warned in October that a price drop for building materials and lumber would cause it to miss third- and probably fourth-quarter estimates.

CEO Arthur Blank reiterated the company's caution about meeting fourth-quarter sales targets, citing tough comparisons to last year and a slowdown in consumer spending. But he remained optimistic about future profits.

graphic"Longer term, trends underlying the home improvement industry remain favorable for continued sales and market share growth at The Home Depot," Blank said. "We remain committed to our goal of 23 to 25 percent earnings per share growth for fiscal 2001."

Shares of Home Depot (HD: Research, Estimates), also a Dow component, added $1.81 to $39.19 Tuesday.

Penney's struggling

Plagued by stiff competition, sluggish clothing sales and weakness at its Eckerd Drug Store unit, Plano, Texas-based J.C. Penney posted a third-quarter loss of 12 cents a share.

graphicThe company warned twice that it would miss forecasts for the quarter. In August, it warned that a slowing economy and a sluggish back-to-school selling season would cause it to miss forecasts and it warned again in October, saying it probably would post a loss for the quarter.

J.C. Penney  (JCP: Research, Estimates) shares were up 50 cents to $11.13.

Target aims higher

Target, the Minneapolis-based discounter that is now the fourth largest retailer, reported net earnings of $216 million, or 24 cents a share, down from $241 million, or 26 cents a share, a year earlier. Analysts polled by First Call had expected earnings of 23 cents a share.

Sales for the quarter increased 8.3 percent to $8.6 billion from $7.9 billion.

CEO Bob Ulrich said he expects low double-digit earnings per share growth for the full year and is confident in the company's ability to achieve average annual earnings per share growth of 15 percent or more over the long term.

graphicShares of Target (TGT: Research, Estimates) gained $2 to $28.19 Tuesday.

Another retailer reporting was Staples (SPLS: Research, Estimates). The No. 2 office supply chain missed third-quarter estimates and warned about the fourth quarter. graphic

  RELATED STORIES

Sluggish retail profits expected - Nov. 13, 2000

Investors dump retail cart - Oct. 6, 2000

Wal - Mart record meets 2Q forecasts while Federated tops lowered estimates - Aug. 9, 2000

Home Depot stock sinks - Oct. 12, 2000

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.