Third-quarter financial results from Chico’s FAS Inc., Signet Jewelers and Burlington Coat Factory underscored the continuing theme that off-price is one of the few safe bets left for retail investors.
Total sales at Burlington during the quarter rose 7.1 percent to $1.44 billion, driven by new stores, while net income increased by 38 percent to $45 million. Comparable-store sales increased by 3.1 percent, but the results beat the retailer’s internal guidance, leading to a bump to its full-year earnings per share guidance to a high of $4.27 from $4.18.
Wall street seems to have been expecting more from Burlington, however, and pushed its stock down 1.2 percent to $105.2 during morning trading, close to an all-time high of $106.45 reached Monday.
Off-pricers such as Burlington and sector leader The TJX Cos. have been steady in the face of shifting consumer habits. J.P. Morgan said in a recent report that growth prospects for off-pricers should remain stable over the next decade, even with ascent of Amazon.
Things were less rosy at Chico’s. The specialty retailer saw third-quarter profits fall 29.2 percent to $16.7 million as net sales decreased 10.8 percent to $532.3 million. Comparable-store sales slipped by 8.2 percent. Chico’s cited the string of hurricanes during the quarter, noting that they took $5 million out of profits, which fell to $16.7 million from $23.6 million.
Nevertheless, Chico’s results were generally in line with its guidance, which it lowered significantly last quarter after missing previous expectations. Wall Street rewarded the retailer by pushing shares up about 0.5 percent to $8.17.
Brian Tunick of RBC Capital Markets said he was “generally pleased with how Chico’s managed through” the quarter, noting it’s closed more than 300 stores this year.
Signet Jewelers did not get the benefit of the doubt after reporting negative comps and an earnings loss of 20 cents per share. Its stock slipped 27 percent during the morning to $55.19, second to an all-time low of $47.88 in May.
The world’s largest diamond retailer said total sales fell 2.5 percent to $1.16 billion and it posted a net loss of $12.1 million, compared with net income of 14.8 million a year ago. Comparable sales fell 5 percent during the quarter, with some negative effect stemming from the recent sale of its credit business.
Tunick said Signet’s results came in below even his “lowered expectations” and the company’s decision to cut its full-year earnings per share guidance by 15 percent to a high of $6.50 suggests “no real comp improvements through the holidays despite easier year-on-year compares, e-commerce improvements and product/marketing initiatives.”
New chief executive officer Virginia Drosos acknowledged the third quarter was “challenging” given the unexpected hurricane season and problems with the transition of its credit business, but she said the company is moving forward with retail and corporate changes.
“We remain focused on executing our three strategic priorities: Customer First, Omnichannel and Culture of Agility and Efficiency,” Drosos said. “While it’s still early, we are aggressively transforming our business and believe we are on the right track to create a more competitive and innovative Signet that is poised for sustainable, profitable growth.”
Drosos took up the top executive position at Signet earlier this year, after former ceo Mark Light left the company for “health reasons” in the wake of his implication in a sprawling gender discrimination class action suit that includes detailed accounts of sexual harassment. The case is currently being arbitrated and the allegations only became public this year.
Even before details of the suit became public, Signet had been struggling with steady declines in sales and profits and related dips in its stock price.
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