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NEW YORK — Despite an upbeat outlook for the holiday shopping season from Wal-Mart Stores Inc., Wall Street took a mixed bag of third-quarter retail sales and earnings results Tuesday as a bad omen by pulling back on the sector.
The S&P Retail Index finished the day down 1.65 percent at 456.75 after Wal-Mart, J.C. Penney Co. Inc., Nordstrom Inc. and TJX Cos. delivered stronger profits, Ross Stores sputtered and Saks Inc. posted a loss. The wider S&P 500 closed the day with a decline of 0.71 percent.
For the second consecutive quarter, Saks Inc. brought in a deeper-than-expected loss, as charges from the planned closings of 12 locations in its Saks Fifth Avenue Enterprises division, as well as hurricane-related costs, dragged down results.
For the quarter ended Oct. 30, the company posted a net loss of $24.8 million, or 18 cents a share, versus earnings of $12.4 million, or 9 cents, in the same period last year. Analysts were expecting a profit of 4 cents. Charges in the most recent quarter totaled $17.5 million, or 13 cents, net of taxes due to store closings. The company said quarterly results were negatively affected by an additional 3 cents because of the hurricanes that hit the South and East Coast this summer. Results in the year-ago quarter included net gains of $5.5 million.
Carving out the charges, Saks Department Store Group reported operating income of $1.1 million in the third quarter, down 94.6 percent from operating income of $20.9 million last year. On that same basis, operating income in the Saks Fifth Avenue Enterprises unit dropped 5.2 percent to $25.9 million from $27.3 million a year ago.
Total revenues in the quarter rose 1 percent to $1.5 billion, while consolidated comps rose 0.3 percent. By segment, sales in the department store group decreased 2.3 percent to $846.5 million, while sales at Saks Fifth Avenue Enterprises rose 5.7 percent to $635.1 million.
Consistent with its strategy of late, as well as with recent speculation among analysts, the company said it plans to close seven underperforming stores in its Saks Department Store Group.
Saks executives said on a subsequent conference call with Wall Street that they are “disappointed in the core margins of the department store business, and there’s a lot of work yet to be done on strategy and execution in this segment…we’re very intent and focused on that.”
On the call, Steve Sadove, chief operating officer, said “some bright spots were in our better women’s apparel areas and some of our women’s apparel areas in the private brand were performing much more favorably in the third quarter than in the second quarter.”
Looking to the fourth quarter, Saks expects flat comparable store sales in its department store segment but more favorable sales at Saks Fifth Avenue Enterprises.
For Nordstrom Inc., third-quarter earnings rose 71.2 percent to $77.8 million, or 54 cents a diluted share, compared with $45.5 million, or 33 cents, last year. Analysts were calling for a profit of 47 cents. The company said a lower tax rate benefited earnings by about 2 cents.
Total sales were $1.5 billion, up 9.4 percent, while same-store sales in the quarter rose 8.1 percent.
The luxury retailer cited merchandising improvements, inventory productivity and expense controls for the robust results. It continues to see customers responding to fashion, color and newness.
Looking ahead, the company raised its full-year earnings projection to $2.68 to $2.73 from a prior forecast of $2.46 to $2.50. Same-store sales in the year are seen up 6 to 8 percent.
In the mass channel, Wal-Mart was helped by strong sales in its international segment as third-quarter earnings came in at the high end of its previous guidance. Although still concerned about rising interest rates and high oil prices, the world’s largest retailer by revenues was upbeat about the approaching holiday season and lifted its full-year earnings guidance.
“We are seeing improvements in employment and real income, and I believe sales momentum will accelerate into the holidays,” said president and chief executive Lee Scott on a recorded call. “We are well positioned for the upcoming holidays, and we should have a better Christmas than last year.”
For its third quarter, Wal-Mart said earnings rose 12.7 percent to $2.3 billion, or 54 cents, matching Wall Street projections and at the higher end of the company’s own prior guidance of 52 to 54 cents. The latest quarter’s results compared with a profit of $2 billion, or 46 cents, a year ago.
Total company revenues were $68.5 billion, an increase of 9.7 percent from the prior year’s $62.5 billion, while consolidated same-store sales were up 1.7 percent. By division, Wal-Mart Stores sales were $45.9 billion, up 8.3 percent, Sam’s Club sales rose by 5.5 percent to $9.1 billion, and international sales jumped 18 percent to $13.6 billion.
The company now sees fiscal-year 2005 earnings of $2.39 to $2.41 a share, which compares with consensus estimates for $2.40 a share and a prior estimate of $2.34 to $2.38. Fourth-quarter earnings are seen at 73 to 75 cents with same-store sales up 2 to 4 percent. The Wall Street consensus is for a profit of 74 cents in the quarter.
For J.C. Penney, rising sales and better margins sent third-quarter earnings soaring despite a $47 million one-time charge. The Plano, Tex., retailer saw earnings vault 86.3 percent to $149 million, or 50 cents a diluted share, beating Wall Street analysts’ consensus estimate of 48 cents. Comparatively, the company reported earnings of $80 million, or 27 cents, in the year-ago period. A $47 million charge related to early debt retirement translated into a hit of 10 cents on earnings results.
Sales, including catalogue and Internet sales, rose 3 percent to $4.46 billion from $4.33 billion.
Excitement surrounding results was somewhat squelched by management’s anticipation of a single-digit decline in fourth-quarter sales.
For TJX Cos., rising sales fueled earnings as the Framingham, Mass.-based off-price retailer saw earnings rise 9.9 percent to $200.9 million, or 41 cents, compared with earnings of $182.8 million, or 36 cents, in the year-ago period. Sales advanced 12.7 percent to $3.82 billion from $3.39 billion. Comparable-store sales rose 4 percent.
At Ross Stores, rising sales couldn’t overcome increasing costs in the third quarter as the Pleasanton, Calif.-based company saw earnings flounder 24.6 percent to $38.1 million, or 26 cents a diluted share. Despite the decline, earnings managed to best Wall Street analysts’ consensus estimate of 25 cents. Comparatively, the company reported earnings of $50.5 million, or 33 cents, in the year-ago period.
Sales rose 5.2 percent to $1.03 billion from $976.9 million. However, the cost of selling those goods rose 360 basis points to 78.4 percent of sales, or $804.5 million, compared with 74.7 percent of sales, or $730.2 million, in the year-ago period.