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Mixed Retail Results in 2nd Quarter Don’t Dampen Hope for Fall

While bad weather and markdown pressures hurt retailers’ second-quarter profits, initial earnings results indicated things could have been worse.

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“It shouldn’t have happened. We screwed it up,” said Questrom. “It was a matter of execution. Issues of pricing and out-of-stock were a problem three years ago and shouldn’t have come back.”

Looking at the quarter in more detail, in addition to the 2.1 percent improvement in department store same-store sales, catalog and Internet sales comped up 3.1 percent. Castagna said all merchandise divisions generated same-store sales gains, with the best performing categories being kids, men’s and family footwear. Fine and fashion jewelry also comped up, she said.

Overall, for the first half of the year, Penney’s profits fell 23.8 percent to $61 million, or 18 cents a diluted share. By comparison, last year the company recorded net income of $80 million, or 24 cents. By segment, the department stores and catalog group saw operating earnings fall 25.1 percent to $134 million, while Eckerd’s operating income ticked down fractionally, or 0.6 percent, to $172 million.

Consolidated sales for the six months dipped 0.8 percent to $14.81 billion from $14.93 billion a year ago. Department store and catalog sales fell 3.3 percent to $7.38 billion, which was partially offset by a 1.8 percent gain at Eckerd to $7.43 billion.

In guidance, Penney said third-quarter EPS is forecast at 25 to 30 cents, and full-year earnings are expected to be $1.25 to $1.35 a share.

MAY DEPARTMENT STORES
The May Department Stores Company swung to a loss in the second quarter as charges from the impending closure of 32 Lord & Taylor Stores, as well as two other doors, more than eradicated any earnings.

For the three months ended Aug. 2, the St. Louis-based parent of L&T, Filene’s and Kaufmann’s, among others, registered a net loss of $110 million, or 39 cents a diluted share. That compares with last year’s profits of $69 million, or 22 cents. Excluding charges accruing to $318 million, or 69 cents, for asset impairment related to the shuttering of the 34 stores, net income would have been $92 million, or 30 cents, which beat the Wall Street consensus estimate by 3 cents. Excluding charges in last year’s quarter, as well, net income fell 13.2 percent from $106 million, or 34 cents.
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