NEW YORK — Retailers reporting third-quarter results Thursday bolstered their bottom line by keeping inventories tight.
Pacific Sunwear of California Inc., Kohl's Corp. and Target Corp. each cited better inventory controls for their higher gross margin rates, which increased their profits. At Urban Outfitters Inc., gross margins fell, but the retailer's top and bottom lines swelled during the quarter, strengthened by strong demand for its three brands.
Urban Outfitters' net profits rose over 40 percent on a 33.5 percent revenue gain in the quarter ended Oct. 31. The specialty retailer earned $37.2 million, or 22 cents a diluted share, matching analysts' estimates. Comparatively, the Philadelphia-based company had a profit of $26 million, or 15 cents, a year earlier. Third-quarter net revenues jumped to $288.8 million from $216.4 million a year ago.
Consolidated comparable-store sales were up 13 percent, the company said, consisting of a 19 percent jump in comps at Urban Outfitters stores, a 7 percent comp increase at Anthropologie and a 21 percent comp surge for Free People. "This year's third quarter was the best in the company's history," said Richard A. Hayne, chairman and president of Urban Outfitters, on a post-earnings report conference call with analysts and investors. He said comp-store sales were driven by demand for apparel and accessories at Free People as well as home product sales at Anthropologie.
Operating margin was 21 percent of net sales during the quarter, the highest in the company's history, Hayne said. Gross profit margin, however, fell to 41.6 as a percent of sales versus 42.3 percent a year ago. The company attributed the decrease to having too much of some items and taking "aggressive" markdowns to clear them from stores.
Looking to the fourth quarter, the company said November sales "continue to run significantly above our plan." Urban plans to open 30 to 32 new stores this year, including four new Free People sites. The company opened 21 stores so far, including its first Free People hard shop within Bloomingdale's here on 59th Street. Sales have already been "exceptional," the company said.
Meanwhile, Target Corp. delivered earnings per share three cents above Wall Street analysts' consensus estimate, while also seeing significant gross margin growth. For the third quarter ended Oct. 30, net earnings from continuing operations swelled 34.3 percent to $435 million, or 49 cents a share, from $324 million, or 36 cents, in the prior year, on a total revenue gain of 11.9 percent to $12.21 billion from $10.91 billion. Same-store sales rose 5.9 percent in the quarter.Douglas A. Scovanner, chief financial officer, chief accounting officer and executive vice president of Target, said on a conference call that the retailer "enjoyed exceptional gross margin rate expansion in the quarter, totaling 121 basis points and reflecting substantial improvement in markup. In addition, favorable markdown and inventory shrink experience contributed to our strong gross margin rate performance."
Scovanner went on to say the credit card operations also continue "to contribute meaningfully to our overall profitability." The business added $158 million on a pretax basis to Target's earnings, which is a 31.3 percent year-over-year gain.
Gregg W. Steinhafel, president of Target Stores, said on the call the same-store sales growth was "driven primarily by an increase in average transaction amount." Bolstering comps was a strong performance in men's wear, women's wear, food and commodities.
After the market closed, Kohl's Corp. posted a significant gain in profits as sales rose 13.7 percent. Net income climbed 15.3 percent to $155.1 million, or 45 cents, from $134.6 million, or 39 cents, in the same period last year on sales that rose to $3.1 billion from $2.7 billion.
Larry Montgomery, Kohl's chairman and chief executive officer, said in a statement that he was "pleased with our performance on the gross margin line as a result of continued focus on inventory management. Our expenses were on plan and allowed us to make investments in marketing some of our new merchandise brands that will pay dividends in the fourth quarter."
Also after the market was Pacific Sunwear, which said net earnings in the three months ended Oct. 29 rose 20 percent to $40.5 million, or 54 cents a diluted share, matching analysts' estimates. That compared with a profit of $33.7 million, or 44 cents, last year. Third-quarter revenues advanced 13.6 percent to $377.5 million, while same-store sales were up 4.6 percent.
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over-the-top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty