NEW YORK — It was a good news-bad news day for Wal-Mart Stores Inc. on Wednesday: It won the numbers game, but was soundly defeated in its attempt to build a smaller-format store in Dallas.
After a day of tense debate in front of a packed hearing room, the 15-member Dallas City Council unanimously rejected the giant retailer’s third proposal for a new concept. The motion was denied with prejudice, meaning Wal-Mart cannot come back with another try at the same site for two years.
Dallas Mayor Laura Miller, however, is working with Wal-Mart to try to secure another parcel for its smaller format.
On the plus side for the world’s largest company, though, its growing apparel business helped it to double-digit gains in third-quarter sales and earnings.
On a recorded call before the news of the Dallas defeat, Lee Scott, president and chief executive of Wal-Mart, said he was "particularly excited" about the namesake division’s improved apparel offerings: "Our merchants have shown that we can deliver both price and quality."
In addition to its British-born George line, which is still establishing itself in the U.S., Wal-Mart will be introducing Levi Strauss Signature jeans into its stores next year, as reported.
Profits swelled 22.9 percent to $1.82 billion, or 41 cents a share, during the period ended Oct. 31. This compared with year-ago income of $1.48 billion, or 33 cents. The discounter beat Wall Street’s estimates of 40 cents by a penny.
Sales during the three months climbed 11.5 percent to $58.8 billion from $52.74 billion a year ago. Comparable-store sales advanced 3.5 percent.
"After a strong start to the year, comparable-store sales slowed," Scott said, "consumer confidence dropped to a nine-year low, gasoline prices rose and, of course, our customer worried about terrorism and a possible war with Iraq." He stressed that the firm thrived during the quarter without raising prices.
UBS Warburg analyst Linda Kristiansen, in a research note, said the firm’s "improved business mix including gains in apparel, lower shrinkage and markdowns were key factors driving gross margin." Gross margins rose 43 basis points during the quarter.The Wal-Mart division drove operating profits up 15.5 percent to $2.68 billion from $2.32 billion a year ago. Sales for the unit, which includes 1,567 discount stores and 1,243 Supercenters, pushed ahead 11.8 percent to $37.57 billion from $33.6 billion during last year’s third quarter. Comps perked up 4.2 percent, while comp inventories grew by 1 percent.
Sam’s Club didn’t fare as well with operating profits of $240 million marking a 2.4 percent drop from year-ago income of $246 million. Sales rose 6.1 percent, to $7.74 billion, on a 0.4 percent comp increase.
WR Hambrecht & Co.’s Bill Dreher said the firm was "one of the few leaders in retailing able to muddle through an incredibly challenging period. It was a good performance."
As for the Wal-Mart division’s apparel strategy, he noted: "They’re always going to focus on offering national brands." The business is unlikely to have as high a private label saturation as Target, its nearest competitor, which, according to Dreher, has 75 to 80 percent of its apparel offering in private label.
During the nine months, the firm’s bottom line amassed a 22.9 percent uptick to $5.51 billion, or $1.24 a share, from $4.48 billion, or $1, a year ago. Sales inflated 12.9 percent to $173.45 billion from $153.59 billion a year ago. Comps were up 6.1 percent.
Wal-Mart is anticipating earnings of 53 to 55 cents a share in the fourth quarter on a comp sales increase of 3 to 5 percent. Analysts had been expecting 55 cents. The firm also noted that legislation expected to come to a vote next year in Germany, if passed, could eliminate its tax benefits from prior operating losses. If approved, the bill would effect a non-cash impact on earnings.
Cost controls, lower inventories and gains from discontinued operations allowed Federated Department Stores Inc.’s profits to skyrocket in the third quarter even as sales remained essentially flat.
For the three months ended Nov. 2, the Cincinnati-based department store giant posted a 3,433.3 percent increase in net income to $106 million, or 54 cents a diluted share. That compares to last year’s quarter when the company earned $3 million, or 2 cents. Excluding a $31 million gain from the sale of certain assets in this year’s third quarter, as well as restructuring charges from the closing of Stern’s stores and the conversion of Liberty House Stores to Macy’s in the prior-year period, income from continuing operations before extraordinary items nearly tripled to $75 million, or 38 cents, from $26 million, or 20 cents. Earnings per share beat Wall Street forecasts by a penny.Sales were "disappointing," ticking up just 0.1 percent to $3.479 billion from $3.475 billion a year ago. Third-quarter comparable-store sales also failed to advance, falling 2 percent.
In a statement, chief executive officer James Zimmerman said the quarter’s earings performance benefited from lower markdowns resulting from lower inventories, as well as reducing expenses to maximize cash flow.
On a conference call with analysts, chief financial officer Karen Hoguet said: "Even though sales are disappointing, we believe we are managing very well in this difficult retail environment. As you will recall, our sales trend weakened dramatically in July and it stayed weak. The onset of cold weather in October did help somewhat, but geographically, sales were disappointing in all areas."
However, Hoguet held out hope for the year’s final act: "As we head into the fourth quarter, we are somewhat optimistic that we will improve, versus the year-to-date numbers."
The persistent erosion of the department store channel continues to give some analysts pause. In a research note, Robert Buchanan of A.G. Edwards & Sons Inc. wrote: "With same-store sales having declined now for seven quarters in a row — this, as Federated has joined every other conventional department store operator in the land and lost market share — we see no compelling reason to ‘step up’ and buy this name. Our view is that Federated’s relatively high-cost structure precludes it from being able to provide comprehensive and everyday strong values on the selling floor, in a related manner requiring this retailer to be selectively promotional."
Overall, for the first nine months of the year, Federated produced a 178.9 percent improvement in net earnings to $477 million, or $2.39 a diluted share, versus last year when the company recorded profits of $171 million, or 88 cents. Excluding nonrecurring items, earnings improved a more modest 42.8 percent to $297 million, or $1.48, from $208 million, or $1.13. Sales for the period declined 1 percent to $10.42 billion from $10.52 billion a year ago, as comp-store sales were off 2.6 percent.
@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
Eighty degree temperatures and outdoor installations at the annual Art Basel Miami Beach called for bright, elevated beachwear. See more street style pictures on WWD.com. #theyarewearing #ABMB (📷: @lifeinreverie)
Following September’s emotional tribute to her brother Gianni, Donatella Versace wanted to bring the spring show’s deep sense of intimacy to her @versace_official pre-fall collection. Donatella found inspiration in Versace Palazzo in Milan and from Gianni’s opulent apartment. Archival patterns and new motifs were splashed on silk shirtdresses and fitted jersey frocks. See the rest of the photos on WWD.com. #wwdfashion
Demna Gvasalia continues to shake up the Paris fashion calendar — and experiment with new runway timetables for his @vetements_official brand. WWD has learned that Vetements plans to stage its next coed show for the fall 2018 season on January 19 during Men’s Fashion Week in the French capital. Details about the timing and venue have not been confirmed — stay tuned on WWD.com to catch the latest. #wwdnews (📷: @giovanni_giannoni_photo)
@zacposen's go-to holiday gift? Cookies! "I'll usually bake cookies and send them as a gift," said the designer, who recently released his cookbook "Cooking With Zac: Recipes from Rustic to Refined." Get the recipe for his Brown Butter-Chocolate Chip Cookies via link in bio 🍪🍪🍪 #wwdeye #cookingwithzac
For @monsemaison’s pre-fall 2018 collection, Fernando Garcia and Laura Kim honed in on the brand’s many signatures — men’s wear, which was tweaked and feminized through deconstruction, proportion play and lots of bare shoulders. See the rest of the photos on WWD.com #wwdfashion (📷: George Chinese)
On Friday night, @yohjiyamamotoofficial received the Design for Asia Lifetime Achievement Award in Hong Kong. The 75-year-old designer has been celebrated for many years and is best known for his dark and avant-garde tailoring. “In my long career, in design, architecture, [I’ve been to] so many parties, this is the very first time that I have such a warm feeling, I really appreciate this,” Yamamoto said. #wwdfashion (📷: @dominiquemaitre)