Most Recent Articles In Business
Latest Business Articles
LUXURY BEAT-DOWN: As expectations have crept lower in recent quarters, luxury retailers have had nowhere to go but up. As a result, both Nordstrom Inc. and Saks Inc. were hailed by analysts for their second-quarter results, even though both lost money during the period. “Nordstrom is navigating this very difficult consumer spending environment as well as can be expected,” said Bill Dreher, an analyst at Deutsche Bank. On Aug. 13, Nordstrom reported a 27 percent drop in net income to $105 million, or 48 cents a diluted share, for the second quarter, in line with analyst consensus. Total revenues declined 6 percent to $2.23 billion. Sales at the company’s anniversary event were down 6.6 percent, better than the Seattle-based retailer expected. Saks, meanwhile, reported a net loss of $54.5 million, or 39 cents a diluted share, on Aug. 18, beating the 52 cent loss expected by analysts. Sales fell 14.5 percent to $561.7 million, and dropped 15.5 percent on a same-store basis. Stephen Sadove, Saks’ chairman and CEO, said during a conference call, “I don’t like the fact that we’re losing money. But for the second quarter, I’m extremely pleased with our expense management, and our gross-margin performance exceeded our expectations.” Still, not all analysts were swayed by the bad-means-good mentality. “The worst is over, but the luxury customer is likely to be impaired for some time,” said Todd Slater, an analyst at Lazard Capital Markets.
— JESSICA PALLAY
EXECS EYE 2011: Retailers are anxious to look ahead, especially given almost uniformly weak second-quarter results and a poor outlook for the key back-to-school season — and now a survey of top executives found that many don’t expect any real improvement until at least 2011. Seventy percent of retail executives surveyed by KPMG predict business conditions will improve next year, with 68 percent predicting stronger revenues and 66 percent forecasting better profits. But 44 percent of executives also thought the economy wouldn’t substantially recover until 2011 or beyond. “The executives I talk to feel we may have reached a bottom,” said Mark Larson, KPMG’s global retail sector chair. Larson was encouraged by the survey, but acknowledged that the improvement in 2010 will come off plummeting profits and sales in 2009. Three-quarters of the retailers surveyed by KPMG said they had already trimmed their workforces, and only 14 percent were still planning to issue pink slips. Overall, 54 percent of those surveyed by KPMG said their strategic focus was on investment, while the rest are still zeroed in on cost cuts. Among the biggest challenges vexing the retailers were restoring consumer confidence, cited by 55 percent of the executives, and finding new sources of revenue growth, which was mentioned by 51 percent of participants. The survey of 65 top retail executives was conducted by Clarion Research Inc. in May, June and July.
— EVAN CLARK
OFF-PRICE ON TARGET: Consumers have been tentative in their spending in the mid-price retail tier, but the off-pricers continued to benefit from shoppers’ thriftiness. Sears Holding Corp. posted an unexpected second-quarter loss of $94 million, or 79 cents a diluted share, on a 10.3 percent decline in revenues to $10.55 billion. Excluding charges for store closures and other items, Sears’ losses of 17 cents a share were still well below the 35-cent profit Wall Street was expecting. The same trend hurt regional department store The Bon-Ton Stores Inc., where losses widened slightly to $34.8 million. It was a different story in the off-price channel, where Ross Stores Inc.’s second-quarter earnings rose 45 percent to $103.4 million and Stein Mart Inc. reversed year-ago losses and posted income of $1.5 million. The TJX Cos. handily beat analysts’ estimates with a 31 percent rise in profitability and increases in both net and same-store sales. President and CEO Carol Meyrowitz said the company still has plenty of growth ahead as shoppers adjust their spending habits. “Value is winning in this environment, and we believe that it’s here to stay,” she said on a conference call with analysts last week. “We are extremely well positioned for today and the future.”
— E.C. & ARNOLD J. KARR