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Belk Inc., citing the “soft-selling environment” and investments for long-term growth, said Wednesday that net income for the first quarter ending May 3 dropped 32 percent to $19.3 million compared with $28.2 million in the prior-year period.
The company said the decrease was primarily the result of higher expenses from investments in strategic initiatives. Comparable-store sales decreased 0.2 percent and totaled $955.1 million, versus $955.8 million a year ago. Online sales increased 42.4 percent in the quarter, positively impacting comparable sales by 1.8 percent for the period. Juniors, women’s contemporary and better merchandise performed well during the quarter, the company said.
“First-quarter sales comparisons were challenging due to our large increases last year and the soft selling environment this year,” said Tim Belk, chairman and chief executive officer of the Charlotte, N.C.-based department store group. “We did, however, manage to retain most of last year’s gains while experiencing continued growth in our online business. Although the investments we are making in the company will continue to impact our short-term profitability, we are building a solid foundation for long-term growth and success. We recently increased our regular dividend and completed a stock repurchase to reflect our commitment to drive strong returns for our shareholders.”
Cutting into profits is Belk’s program of strategic initiatives, involving spending more than $700 million over a three-year period that began in fiscal 2014. The $4 billion Belk has set a goal to reach $6 billion in revenues within five years.
A big portion of the $700 million is earmarked for developing flagships that serve as linchpins in the retailer’s emerging “hub and spoke” expansion strategy. The new-look flagships are popping up in several states and flaunt pumped-up assortments.
In April, a flagship opened in the Dallas Galleria, on the site of a former Saks Fifth Avenue store. Belk executives have said that Texas is the company’s greatest growth opportunity and three or four additional stores in the Dallas-Fort Worth area could open over the next few years.
Strategic initiatives also entail building omnichannel capabilities, remodeling existing stores and enhancing key departments such as footwear, improving service, developing more personalized customer interactions, enhancing the supply chain and information technology advancements.
In other brick-and-mortar moves, a flagship is scheduled to open in the fall at Bridge Street Town Centre in Huntsville, Ala., along with a new store at Denham Springs/Livingston Parish, La. Other flagship expansion and remodeling projects set for completion this fall include Greensboro, N.C.; Mt. Pleasant, S.C., and Hoover, Ala.