That seems to be the ongoing question as a quartet of retailers reported second-quarter results, providing more evidence — if any was needed — that shoppers are still cautious about their spending and stores continue to find it hard to gain any traction as they head into the second half of their fiscal years.
The companies — Wal-Mart Stores Inc., Kohl’s Corp., Nordstrom Inc. and J.C. Penney Co. Inc. — reported some degree of improvement in business trends over the difficult first quarter. But, as Macy’s Inc. acknowledged on Wednesday when it reported profit improvement that fell short of Wall Street’s estimates, consumers remain uncomfortable with what they deem to be an uncertain economic environment. Click Here for the WWD Global Stock Tracker >>
There were signs of that anxiety in all the results.
Wal-Mart lowered its profit outlook for the year as both its U.S. Wal-Mart discount stores and Sam’s Club unit reported flat comparable-store sales. Kohl’s noted decreases in units per transaction and transactions per store offset by increases in average unit retail and average transaction.
Nordstrom reflected the relative strength of better department stores’ value divisions in comparison to their primary nameplates, and was one of the few retailers raising their full-year outlook.
In one of the more celebrated third acts in modern-day retailing, J.C. Penney Co. Inc. fanned the flames of optimism by taking a far bigger bite out of its second-quarter loss than analysts were expecting.
“We not only grew sales and gained market share in a highly competitive environment,” proclaimed chief financial officer Edward Record, “we did so by selling merchandise much more profitably.”
Here, details on the companies reporting Thursday.
• Wal-Mart Stores Inc. reported a 3.4 percent decline in second-quarter profits attributable to shareholders to $3.92 billion from $4.06 billion in the corresponding period a year earlier. Earnings per share were $1.21 for the quarter ended July 31, a 1.6 percent decline from last year’s $1.23. Analysts predicted EPS of $1.21.
Consolidated net income attributable to the company inched up 0.6 percent to $4.09 billion from last year’s $4.07 billion.
Wal-Mart’s revenues were $119.3 billion in the second quarter, an increase of 2.6 percent over $116 billion in the same quarter last year. Same-store sales were flat in the period. Wal-Mart predicted same-store sales will be flat again in the third quarter ended Oct. 31.
The retailer lowered its EPS guidance for the full year to between $4.90 and $5.15, from $5.10 to $5.45, assuming third-quarter EPS of $1.10 to $1.20.
Operating income declined to $5.52 billion at Wal-Mart U.S., from $5.3 billion in the second quarter of 2013. Operating income at Wal-Mart’s international division rose 8 percent to $1.5 billion, from $1.38 billion, while operatingincome at Sam’s Club fell 4.6 percent to $494 million from $518 million.
Doug McMillon, president and chief executive officer of Wal-Mart Stores Inc., said he was encouraged by the performance of the international division and the Neighborhood Market sales in the U.S. Wal-Mart, which has been accelerating the rollout of its small store formats. However, these may come under pressure from the Dollar Tree-Family Dollar combination, which will become a more formidable threat with 13,000 stores.
Wal-Mart is on track to deliver 180 to 200 new Neighborhood Markets this year. With solid comps, Wal-Mart’s test phase of Express will continue with the rollout of about 90 new units this year. The retailer committed an additional $600 million to accelerate small-format openings in the U.S. The majority of Neighborhood Market and Express units are scheduled to open late in the fourth quarter.
McMillon also praised e-commerce, which advanced 24 percent worldwide during the quarter. The company has been investing to enhance its e-commerce capabilities, including buying tech start-ups such as Luvocracy and redesigning its Web site. The redesign offers a streamlined search and a more personalized user experience. A better checkout process is coming in the near future, the company said.
During the call, executives talked more about e-commerce than brick-and-mortar, although McMillon made a point of saying, “I’m bullish on our core business. Supercenters are still relevant around the world and will play an important role for us for years to come. At the same time, we’re broadening our small store base globally and expanding our digital capabilities everywhere we operate.”
With Amazon in its sights, Wal-Mart has started construction on another new e-commerce fulfillment center in Indiana. Brazil, Mexico and Chile saw double-digit sales growth in e-commerce, and Canada and Argentina rose by triple digits. In July, e-commerce launched in India. Yihaodian, the company’s e-commerce platform in China, grew net sales by double digits.
• Nordstrom, lifted by its anniversary sale and loyalty program, reported earnings per diluted share rose to 95 cents for the second quarter ended Aug. 2 compared to 93 cents for the year-ago quarter even as net income at $183 million was practically even with last year’s $184 million.
The per-share result caused Nordstrom to raise its guidance on earnings per share for the year to $3.80 to $3.90 from a previous projection of $3.75 to $3.90. The company also raised its outlook for the year’s comp sales to a 3 to 4 percent increase, from the previous 2 to 4 percent.
Blake Nordstrom, president, said in a conference call that the store’s second quarter is “materially different from many other retailers due to the anniversary sale, which our team continues to build upon.” The event had a 3.6 percent comparable increase.
Total sales were $3.3 billion for the second quarter, a 6.2 percent gain from $3.1 billion during the same period in fiscal 2013. Total comparable sales increased 3.3 percent.
Nordstrom said that Trunk Club, a personalized clothing service for men, which Nordstrom has agreed to purchase for $350 million in stock,expects to achieve operational profitability and more than double its annual sales to more than $100 million this year. Trunk Club will reduce earnings per diluted share in fiscal 2014 by 3 to 5 percent. The deal is expected to close in the third quarter.
In the quarter, top-performing categories included cosmetics, accessories and men’s. By channel, full-line stores comparable sales for the second quarter decreased 1.2 percent; direct net sales increased 22 percent, and Nordstrom Rack rose 4 percent in comp sales.
Members of the Nordstrom Rewards loyalty program shop and spend more than nonmembers. The company said it opened nearly 370,000 new accounts in the second quarter, an increase of 18 percent compared with the same period last year. With 4.1 million active members, sales from members in the second quarter increased 11 percent in the second quarter and represented 44 percent of sales, from 42 percent for the same period last year.
Ending inventory per square foot increased 19.2 percent, while sales per square foot increased 2.7 percent. Inventories are up largely due to the rapid growth of Rack, which is being supported by increased pack and hold inventory, as well as investments in the full-price business to drive online growth and in well-performing merchandise categories, Nordstrom said. Officials said inventories are at “appropriate levels” and that it didn’t expect inventory to continue to outpace sales over the long run.
Nordstrom plans to open three full-line stores this year, in Houston, Jacksonville, Fla., and Calgary, which will be the company’s first in Canada.
Rack, continuing aggressive expansion, opened 11 units so far this year and plans another 16 through the rest of the year.
Pete Nordstrom, president of merchandising, elaborating on the store’s fashion business, said there’s been “good growth” in Topshop, which currently has shops operating inside 52 Nordstrom locations, and more to come. He said Topshop “lifts all boats in women’s.” Cosmetics is the top comp-sales division year to date, Pete Nordstrom said. Denim and women’s active were also strong performers. In June, Nordstrom extended the responsibilities of Tricia Smith, executive vice president and general merchandise manager of women’s apparel, to include the designer, juniors and kids categories.
Blake Nordstrom said the company could fall “a little short” of its goal to reach 230 Racks by 2016 but would come close. “We feel really good about the growth of Rack and the opportunity there,” but some “nuances” revolving around the availability of real estate could affect the buildup.
In yet another fashion show shuffle, @elleryland is moving its show in sync with the Paris couture calendar — though the brand is still keeping one foot on the city’s ready-to-wear schedule. Their runway show in January will coincide with the launch of a new strategy: designing two main collections each year instead of four, which will then be released in four drops. “As we all know, the system needs to change. We need to show sooner to give time back to artisans and designers to do what they do best — create,” said founder Kym Ellery. #wwdnews #wwdfashion (📷: @kukukuba)
@maxmara’s classic 101801 coat was the cornerstone of its pre-fall 2018 collection. The design team expanded the traditional double-breasted, kimono-sleeved style into a trapeze coat, lean belted styles and a peacoat and presented them in monochromatic looks – like the camel one pictured here. #wwdfashion #prefall18 (📷: George Chinsee)
The @cfda has shifted the dates of #NYFW, with Men’s showing on February 5 through February 7, and Women’s will directly follow, running from February 8 through 14. The preliminary schedule will be released on the CFDA’s web site in the next few days, but Mark Beckham, VP of marketing for the CFDA, revealed that @rafsimons will be back to close the men’s-specific part of the week with a show on February 7 #wwdfashion (📷: Kelly Taub)
@ferragamo is introducing a new space dedicated to the development of women’s and men’s leather good samples. The laboratory, which is created eco-friendly materials and designed to reduce the environmental impact of the manufacturing processes, will allow the company to expand its accessories offering through traditional artisanal approaches. #wwdfashion (📷: @aitorrosasphoto)
How does a “regular, degular, schmegular” girl from the Bronx, N.Y., become a Grammy-nominated artist with a certified platinum record in less than a year? Call it the @iamcardib come up. The 25-year-old has become a musical sensation, and the fashion world is taking note. “If I could describe her style I would say drama. She’s really into the dramatics,” says Cardi B’s stylist @kollincarter. See how Carter styles her bold and out there looks with the link in bio. #wwdfashion
“There is no formula. There is no guideline. I can watch Ted Talks all day, but there is no one who can advise me on exactly what it is I should be doing,” said @ronniefieg, CEO of @kith, in an interview with WWD’s @ariahughes at the brand’s new SoHo office in Manhattan. Head to WWD.com to see how Fieg went from hanging out in shoe stockrooms at 13 to building his own business. #wwdfashion (📷: @weston.wells)
@fearofgod and @maxfieldla have teamed up on a pop-up installation. The store, located in the gallery space across from Maxfield’s Melrose Ave location, is the site of the brand’s House of God pop-up in which Fear of God founder @jerrylorenzo has created a church-inspired installation. A dozen vintage church pews sit in front of an LED screen playing 90s gospel singers in an effort to re-create an environment akin to a Southern Baptist Church, Lorenzo explained. Read more about the pop-up on WWD.com #wwdfashion (📷: Jennifer Johnson)
Known for his sleek, sophisticated American glamour, Norman Norell is the subject of an upcoming exhibition at @fitnyc. “Norell: Dean of American Fashion,” which runs from February 9 through April 14, will feature approximately 100 ensembles and accessories. His best work is exemplified by the designer’s glittering “mermaid” gowns frosted with thousands of hand-sewn sequins – like the one pictured. (📷: William Helburn) #wwdfashion
For pre-fall 2018, @balmain didn’t let go of the glitz. A crystal embroidered baseball jacket priced at around $40,000 hangs in the “couture” section of the brand’s first men’s pre-collection. Sporting the words “Balmain Army” across the back, the item took around two months to make. “When it was completed, it was like Christmas, it was like, ‘It’s done, it’s exactly what I wanted,’” said Balmain’s creative director @olivier_rousteing during a tour of the collection in a Paris showroom on Monday. #wwdfashion