Retailers checking in with earnings reports on Thursday had good things to say about their third-quarter apparel businesses, as well as their prospects for the fourth quarter.
Setting the upbeat tone, Target Corp. chairman, president and chief executive officer Gregg Steinhafel predicted a strong quarter and holiday season ahead. “We expect Target’s fourth-quarter comparable-store performance will be the best of any quarter in the last three years,” he said. That would put it above the 2.8 percent gain registered in the first quarter. Both men’s and women’s apparel outperformed the 1.6 percent comp increase registered in the third quarter.
After the markets closed, Limited Brands Inc. raised full-year guidance after reporting third-quarter earnings that just beat analysts’ expectations but arrived with a 10 percent comp increase attached. Shares of Chico’s FAS Inc. soared more than 10 percent as the company, recovering from a bad start, beat estimates with a 26.8 percent jump in its third-quarter profit profile.
On the vendor side, shares of Perry Ellis International Inc. rose 9.9 percent to $23.46 after its third-quarter profits jumped 69.8 percent on a 13.2 percent sales increase and substantially boosted its full-year guidance.
The favorable winds blowing out of the apparel sector, coupled with better-than-expected profits and elevated guidance from BJ’s Wholesale Club Inc., helped lift the S&P Retail Index 3.76 points, or 0.8 percent, to 474.29 on a day when the Dow Jones Industrial Average fell just over 0.1 percent, to 11,007.88, and the S&P 500 rose less than 0.1 percent to 1,178.59.
Where its larger discount competitor, Wal-Mart Stores Inc., said Tuesday that shoppers were waiting for their next paychecks to head to stores, Target, catering to a slightly higher-end consumer with a distinct fashion message, talked about life’s little luxuries.
“The recession taught [shoppers] to create and live within budgets, and even as the economy improves, they continue to shop with a list,” said Kathryn Tesija, executive vice president of merchandising, on a conference call with analysts. “More recently, guests have started to put an occasional indulgence on that list.”
Tesija said Target was making meaningful market share gains in the beauty and apparel categories, as well as in toys, health care and groceries. The company is also continuing to roll out quick-hit designer exclusives with brands such as Mulberry and William Rast.
Its performance was in sharp contrast to Wal-Mart’s, where weak apparel sales contributed to a 1.3 percent comp drop in its U.S. discount stores.
Target’s profits for the three months ended Oct. 30 climbed 22.6 percent to $535 million, or 74 cents a diluted share, from $436 million, or 58 cents, a year ago. Revenues rose 2.2 percent to $15.61 billion from $15.28 billion. EPS topped analysts’ estimates by 6 cents and helped push the stock up 3.9 percent to $55.62 Wednesday.
Tight inventory management, and a double-digit comp gain in large part attributable to Victoria’s Secret’s 14 percent leap, helped Limited Brands more than quadruple its quarterly profits to $61.3 million, or 18 cents a diluted share, from $14.9 million, or 5 cents, a year earlier. Net sales increased 11.6 percent to $1.98 billion from $1.78 billion. Analysts polled by Yahoo were looking for EPS of 17 cents on revenue of $1.98 billion.
The company’s gross margin expanded to 36 percent of sales, strongly ahead of the 31.7 percent recorded during the third quarter of fiscal 2009.
Adjusted EPS for the year, previously pegged at $1.68 to $1.83, was lifted to between $1.82 and $1.97.
Producing the second biggest percentage gain of the 172 public companies tracked by WWD, Chico’s shares ended the day up $1.06, or 10.5 percent, at $11.13 after it reported an 8.1 percent increase in sales to $446.9 million, highlighted by a 14.2 percent improvement at its White House|Black Market chain. Comps were up 3.1 percent, led by WH|BM’s 7.1 percent jump.
Net income was $28.8 million, or 16 cents a diluted share, up from $22.7 million, or 13 cents, in the year-ago period. Gross margin eased to 56.9 percent of sales from 57.6 percent a year ago.
“We began the quarter with negative comps due to the self-inflicted problems of transitioning to fall product too soon in the Chico’s brand, causing a lack of wear-now product,” president and ceo David Dyer said on the firm’s conference call. “In the White House brand, our full-price inventories were too low and we lacked sufficient clearance inventory. However, as the quarter progressed, our performance steadily improved and we have recovered the positive momentum in our business.”