Despite Tough Quarter, Stores Remain Upbeat

Wal-Mart’s flat profits stood in direct contrast to the other stores reporting results Thursday, all of which saw profits declines.

Kohl’s opened 19 stores in the first quarter and this fall plans to open another 37 doors, most of which will be former Mervyns sites picked up after that chain was liquidated. The Menomonee Falls, Wis.-based retailer now anticipates earnings of $2.19 to $2.42 a diluted share this year, up from the $2 to $2.30 previously expected. Shares of the firm fell 71 cents, or 1.7 percent, to $41.24 following the Thursday-morning announcement.

Philadelphia-based Urban Outfitters said customers today are responding only to merchandise they absolutely can’t live without.

“Our data tells us the customer is buying less and that she’s more discriminating,” ceo Glen Senk told analysts on a conference call. “She’s seeking fashion, and there’s no evidence of price elasticity on desirable product. If it’s a ‘love,’ she’s buying it, plain and simple. If it’s a ‘like,’ perceived as too basic, or a recycle of older fashion, she may wait for the first markdown. And if she doesn’t like the product, it’s not going to sell until it’s on clearance.”

As a result, he challenged his merchants and designers “to work harder and smarter to create and identify the ‘loves.’ Just like our customer, they’ve got to be more discriminating.”

For the period ended April 30, profits fell to $30.8 million, or 18 cents a diluted share, 1 cent better than analysts expected, from year-ago net income of $42.6 million, or 25 cents a share. Net sales shrank 2.4 percent to $384.8 million, from $394.3 million, a year earlier. Analysts had projected earnings of 17 cents a share.

Comparable-store sales declined 7 percent overall, with drop-offs of 6 percent at the namesake division, 13 percent at Anthropologie and 23 percent at Free People. Pressured by higher store occupancy expenses, lower sales and higher markdowns, gross margin slipped to 37.2 percent of sales from 40.2 percent in the first quarter of 2008.

“I’m feeling more optimistic than I have since October 2008,” Senk told analysts. “I don’t believe we’ll be returning to 2007 spending levels for several years, but I believe the environment is considerably more stable than it was in the fourth quarter.”

Shares rose 21 cents, or 1.1 percent, to $19.04 on Thursday.

In Washington Thursday, the Labor Department reported wholesale prices for U.S.-made apparel fell 0.3 percent in April compared with March, but increased 1.3 percent from a year earlier.

Women’s and girls’ apparel prices declined 0.5 percent in April, but increased 1.3 percent in year-to-year comparisons, according to the Producer Price Index. Men’s and boys’ apparel prices were up 0.1 percent month-to-month and 2 percent from the prior year.

Prices for all U.S.-made goods increased a seasonally adjusted 0.3 percent in April, driven primarily by rising food prices. The increase followed a drop of 1.2 percent in March and a rise of 0.1 percent in February.


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