The holiday warning signs just keep flashing brighter.
Wal-Mart Stores Inc., Target Corp. and Sears Holdings Corp. on Thursday stirred further concern as they reported third-quarter numbers. Wal-Mart raised the most red flags by missing analysts’ sales estimates, an indication that its core lower-income customer is still struggling with high unemployment and high gas prices.
The miss sent Wal-Mart’s shares down 3.5 percent to $68.80 and rippled through the entire stock market. The S&P 500 Retailing Industry Group slipped 0.03 percent to 634.72 as the Dow Jones Industrial Average fell 0.2 percent to 12,542.38. Markets were also shaken by the news that Europe has officially entered another recession, stirring more fears over the global economy. RELATED STORY: As Holiday Gears Up, So Do Retail Worries >>
Other retail decliners included The Bon-Ton Stores Inc., which posted narrower third-quarter losses, but saw its stock slip 5.8 percent to $10.30; Urban Outfitters Inc., down 3.8 percent to $34.82, and American Eagle Outfitters Inc., off 2.4 percent to $18.87.
Wal-Mart’s sales for the third quarter rose 3.4 percent to $113.20 billion, but missed analysts’ average forecast of $114.96 billion. The retail giant earned $3.64 billion, or $1.08 a share, compared with $3.34 billion, or 97 cents a share, a year earlier.
Looking ahead, Wal-Mart chief executive officer Mike Duke — who was among business leaders who met President Obama on Wednesday to discuss the looming “fiscal cliff” — said, “Price will continue to be a major factor for customers over the holidays. Our strong price position and broad assortment are clear competitive advantages in an economy where customers may still be cautious with their budgets.”
The retailer reported that net sales in the third quarter were $113.2 billion, a 3.4 percent increase over last year. Currency exchange rate fluctuations negatively impacted net sales by about $1.7 billion. Without the currency impact, net sales would have been $114.9 billion, a 4.9 percent increase. Wal-Mart U.S. posted a 1.5 percent increase in comp-store sales in the 13-week period ended Oct. 26. Sam’s Club’s same-store sales, without fuel, rose 2.7 percent. Wal-Mart International’s sales rose 2.4 percent to $33.2 billion on a constant currency basis.
Duke also noted that the company continues to invest in e-commerce. Fourth-quarter diluted earnings per share from continuing operations are expected to range from $1.53 to $1.58. For the full year, Wal-Mart provided EPS guidance of $4.88 to $4.93.
Target beat Wall Street analysts’ estimates for third quarter net earnings, which rose 15 percent to $637 million, or 96 cents a share, from $555 million, or 82 cents a share, in last year’s third quarter. Third-quarter EPS includes a 15-cent gain from the pending sale of Target’s credit card receivables portfolio. Excluding the gain, the profit was 81 cents a share, 4 cents higher than Wall Street was expecting.
Sales in the third quarter increased 3.4 percent to $16.6 billion from $16.1 billion last year, reflecting a 2.9 percent increase in comp-store sales combined and the contribution from new stores.
Gregg Steinhafel, chairman, president, and ceo of Target, said during a conference call with retail analysts, “We are well-positioned to deliver strong fourth-quarter performance by offering compelling merchandise and unbeatable value through initiatives like the Target/Neiman Marcus Holiday Collection, 5 percent Red Card Rewards and a new holiday price-match program that will allow guests to shop at Target with confidence during the holiday season.”
Kathryn A. Tesija, executive vice president of merchandising and supply chain, said men’s and performance apparel have been strong, conceding that women’s and kid’s have been a little weaker. “The weakness in kids and ready-to-wear is relative weakness, mostly driven by seasonal,” she said. “We saw some strength in the ‘better’ and ‘must-have’ product [categories]. Throughout the course of the year, our apparel business has been pretty solid.”
Despite the hype for the Target + Neiman Marcus Holiday Collection, Tesija said she’s not interested in doing more permanent collaborations. “We feel having limited-time partnerships with designers is the best thing,” Tesija said. “It allows us to capitalize on trends in the market.”
Target said it expects adjusted EPS for the fourth quarter of $1.64 to $1.74 and generally accepted accounting principles EPS of $1.45 to $1.55, which reflects the anticipated EPS impact of expenses related to the company’s Canadian market entry.
Both retailers are experiencing employee backlash over stores opening on Thanksgiving Day — Wal-Mart at 9 p.m. and Target an hour earlier. Dozens of petitions were started by Making Change at Wal-Mart, a campaign sponsored by the United Food and Commercial Workers union, which covers retail workers, and others were created on Change.org asking retailers to “save Thanksgiving.” On Thursday, Making Change issued a press release that said warehouse workers walked off the job Wednesday and Thursday in protest at Wal-Mart’s alleged attempts to silence workers who speak out for better jobs. Warehouse workers from Southern California walked off the job Wednesday afternoon and were joined on Thursday by workers from Seattle. Making Change said the strikes are the first of 1,000 protests at Wal-Mart stores leading up to Black Friday.
“This is just another exaggerated publicity campaign aimed at generating headlines to mislead our customers and associates,” said Wal-Mart spokesman Kory Lundberg. “We have a great group of associates at Wal-Mart. We’ll have more than one million associates working throughout the holiday weekend and they’re excited about our Black Friday plans this year. This is the Super Bowl for retailers and we’re ready. The fact is, these ongoing tactics being orchestrated by the UFCW are unlawful and we will act to protect our associates and customers from this ongoing illegal conduct.”
Both Wal-Mart and Target have picked up share from Sears, which has charted a new direction under the control of hedge fund guru-turned-retail iconoclast Edward Lampart.
Lou D’Ambrosio, president and ceo of Sears, said he was going to put the pedal down on the company’s transformation — even as net losses in the third quarter widened to nearly half a billion dollars.
“The retail industry continues to change dramatically and rapidly,” D’Ambrosio told Wall Street on a conference call. “It will never go back to what it was, and we have seen the consequences for those that have not changed fast enough. There is no choice, which is why we will continue to accelerate our transformation.”
D’Ambrosio is steering the company toward a membership-based model anchored in its Shop Your Way program, which is receiving “several hundred million dollars” in investment this year.
“More than half of our revenues at Sears and Kmart now come from Shop Your Way members,” the ceo said.
Sears’ efforts to court customers in new ways weren’t enough to pull the firm into the black in the third quarter.
Net losses attributable to the retailer widened to $498 million, or $4.70 a share, from $421 million, or $3.95, a year earlier.
The company said adjusted losses before interest, taxes, depreciation and amortization narrowed to $156 million in the quarter from a deficit of $190 million a year ago.
Revenues for the quarter ended Oct. 27 fell 5.8 percent to $8.86 billion from $9.41 billion. The Sears chain in the U.S. posted a comparable-store sales decline of 1.6 percent, while the Kmart unit comped down 4.8 percent. Apparel was called out as a stronger performer than the average.
The quarterly results drove shares of Sears down 5.9 percent in after-market trading.
“My personal philosophy to beauty is paying attention to oneself. I love to be outdoors, lots of fresh air, trying to take care of yourself as best you can. I always notice that comes through,” says Felicity Jones, the global face of @shiseido-owned @cledepeaubeauteus, which launches today. Head to WWD.com to read more about the actress’ love for beauty and how she prepared for her new role in “The Basis of Sex,” playing the young Ruth Bader Ginsburg. #wwdbeauty (📷: @dandoperalski)
For men’s fall 2018, @giuseppezanotti drew on elements from streetwear, sport, biker, combat and rock ‘n’ roll. Pictured here are a pair of shoes from the collection, featuring zippers, rhinestones, and silver hardware. Head to WWD.com to see a roundup of the accessories from Milan’s men’s fall 2018 shows. #wwdfashion (📷: Andrea Delb)
To celebrate the 25th anniversary of @ralphlauren’s snowboarding collection, the brand is mining its archives. The iconic brand is reintroducing vintage styles and dropping new designs for a color capsule that will be available in Ralph Lauren stores and @openingceremony on January 25. The capsule will consist of 10 pieces, including the Snow Beach Pullover, pictured here, which is a collector’s item that rapper Raekwon wore in Wu-Tang Clan’s “Can It Be All So Simple” video. #wwdfashion (📷: Tom Gould)
For @rochasofficial’s pre-fall 2018 collection, creative director Alessandro Dell’Acqua channeled the sophisticated and intriguing Catherine Denevue in the film “Belle de Jour.” Polished collarless coats, midi skirts, suits and ’60s graphic motifs were all featured in the collection, adding a sense of discreet luxury. See the rest of the photos on WWD.com #wwdfashion
“We tried to produce clothing of that couture quality, but the most daunting part was that we only had a matter of days [to do it],” said costume designer Lou Eyrich, who recreated Gianni Versace’s iconic looks for @americancrimestoryfx. Eyrich searched online retailers and vintage shops for original pieces from the design house and for @penelopecruzoficial, who plays Donatella Versace. Head to WWD.com to read how she created the Versace world. #wwdfashion
Only three months after her stellar debut catwalk season, @kaiagerber has inked her first big design collaboration –– with @karllagerfeld. The collection blends Lagerfeld’s Parisian chic aesthetic and the model’s signature West Coast casual style via RTW, accessories, footwear and more. The #KarlLagerfeldxKaia collection will launch in September with a series of events. Get all the details on WWD.com. #wwdnews #wwdfashion
Harrods plans to remove the famous statue of Princess Diana and Dodi Al Fayed from the bottom of the Egyptian escalators and hand it back to Mohamed Al-Fayed. “We are very proud to have played our role in celebrating the lives of Diana, Princess of Wales and Dodi Al Fayed at Harrods and to have welcomed people from around the world to visit the memorial for the past 20 years,” said Michael Ward, Harrods managing director. “With the announcement of the new official memorial statue to Diana, Princess of Wales at Kensington Palace, we feel that the time is right to return this memorial to Mr. Al Fayed and for the public to be invited to pay their respects at the palace.” More on the news, with reporting by @loreleimarfil, at WWD.com. #wwdnews