US Q2 in brief - TJX Companies, JC Penney, Nordstrom, Dillards, Macy's
In the most recent second-quarter filings from US apparel and footwear brands and retailers, Nordstrom delivered what analysts described as a "disappointing" second-quarter, despite results coming in better than management expectations. Dillards, meanwhile, reported "poor" earnings and sales figures, and Macy's saw a "distinct" improvement in its sales and earnings trends for the quarter. Skechers missed analyst estimates as it revealed earnings hit by one-off charges, while Under Armour grew its top line thanks to strong sales in its domestic and international businesses.
TJX Companies, Inc
TJX Companies has revealed second-quarter earnings and sales in line with management expectations thanks to strong customer traffic and comps. Net income reached US$562.2m from $549.3m in the prior year. Gross margin was up 0.3 percentage points to 29.4% thanks to a strong increase in merchandise margins and gains related to the company's inventory hedges. Net sales were up 7% to $7.9bn, while comparable sales increased 4%. CEO Ernie Herrman, said: "The third quarter is off to a solid start, and we see plentiful opportunities for our business in the second half of the year and beyond. We remain laser focused on achieving our goals for 2016 and are passionate about surpassing them."
JC Penney Company, Inc
Department store retailer JC Penney reaffirmed its outlook for the full year as it revealed higher second-quarter sales and an improved net loss of $56m from a loss of $117m last year. Gross margin improved by ten basis points to 37.1%. Net sales were up 1.5% to $2.92bn, while comparable store sales increased 2.2%. CEO Marvin Ellison, said: "We are pleased with the sequential improvement we achieved throughout the second quarter, and our solid performance across all key metrics is encouraging. We are continuing to win market share and improve the bottom line of our business." For the full year, the retailer is expecting a comparable store sales increase of 3-4%, and gross margin expansion of10 to 30 basis points.
Dillards reported what it described as "poor" second-quarter results as earnings tumbled and sales and gross margin declined. In the three months ended 30 July, net income fell to US$12.1m from $29.9m in the year ago period. Consolidated gross margin declined 99 basis points, while net sales dropped 4% to $1.45bn from $1.51bn in the prior year. CEO William Dillard, said: "The challenges facing apparel retailers continued through the second quarter, and our poor results reflect this. In spite of weak sales, we returned $57m to shareholders through stock repurchase and dividends. While we continue to deal with weakness in the fashion retail industry, we believe we are in good financial shape for the long term."
US upscale fashion retailer Nordstrom has delivered what it says are "better than expected results" for the quarter. Earnings amounted to US117m from $211m in the year ago period. Gross margin was down 101 basis points to 34.3% due to increased markdowns to align inventory to current trends and higher occupancy expenses related to new store growth. Net sales dropped 0.2% to $3.6bn, while comparable sales were down 1.2%. CEO Blake Nordstrom, noted: "Over the past several quarters, our team has been actively addressing our inventory, expense and capital, and in the second quarter, made substantial progress by bringing down inventory in-line with sales. Those efforts, along with the strength of our Anniversary Sale and a great response from customers to that event, drove better than expected results for the second quarter." Analysts, however, described the results as disappointing, and pointed out that, like others, it has been affected by declining mall traffic, a trend they believe will continue to drag down sales growth across the second half.
US department store retailer Macy's said it is encouraged to see a "distinct" improvement in its sales and earnings trends for the second-quarter despite a drop in figures across the board. Net profit swung to US$11m from $217m a year earlier, while sales dropped 3.9% to $5.87bn compared to $6.10bn in the same period last year. For the quarter ended 30 July comparable sales on an owned plus licensed basis were down by 2%, and on an owned basis declined 2.6%. Gross margin stayed the same at 40.9%. The difference between the year-over-year change in total and comparable sales largely resulted from the closing of 41 underperforming Macy's stores in fiscal 2015. Macy's now expects full year comparable sales to drop by 3-4%, while earnings per diluted share are forecast in the range of $3.15 to $3.40. "Over the past few months, we have been saying that a setback is a setup for a comeback, and we now believe we are set up well to proceed to a comeback," adds Terry J Lundgren, Macy's chairman and CEO.
Department store retailer Kohl's has booked a mixed second-quarter as earnings climbed but sales fell, coming in below management expectations. Net profit amounted to US$140m, an 8% increase on earnings of $130m in the prior year. Gross margin improved 53 basis points to 39.5%. Net sales, however, dropped 2% to $4.18bn. CEO Kevin Mansell, said: "Our sales improved over our first quarter results, but were below our expectations. Our associates throughout the organisation continue to effectively manage expenses in response to changing sales trends and I appreciate all of their efforts."
Iconix Brand Group
Brand management company Iconix Brand Group delivered what it said was a "solid" second-quarter, despite declines in both earnings and sales. GAAP net income dropped 16% to $11.6m from $13.7m a year earlier. Net sales were down 2% to $95.7m. CEO John Haugh, noted: "I am pleased that for the second quarter, our company has delivered solid results. Our primary goal is to position ourselves to achieve growth while at the same time improving the balance sheet, and we are making progress on both of those fronts."
US footwear firm Crocs has booked a mixed second-quarter as earnings on a GAAP basis increased 21.1% to US$11.7m, while revenues dropped 6.3% to $323.8m. CEO Gregg Ribatt said the global retail environment became more challenging as the second quarter progressed. He added: "This impacted our wholesale reorder opportunities and contributed to our sales shortfall relative to expectations. We remain confident that we have successfully repositioned the business and built the platform to provide sustained growth and profitability over the long-term." For the full year the company expects revenue to be down low single digits.
Kate Spade & Company
Kate Spade posted a "respectable" set of numbers for the quarter, but they showed a clear slowdown in the pace of growth compared to last quarter, analysts said. Earnings reached US$26.8m from $8.5m a year earlier, while gross margin narrowed to 59.7% from 61%. Net sales increased 13.7% to $320m, with direct-to-consumer comparable sales growing 4% compared to a 19% uplift posted during the first quarter. Analysts pointed to three factors that negatively impacted growth: the comeback of competitors like Coach; an increase in consumer uncertainty, especially among younger female shoppers; and a weakening of marketing impact, which has hit visiting and purchasing.
US footwear and accessories specialist Steve Madden has adjusted its sales outlook for fiscal year 2016 after posting lower than expected second-quarter results. For the three months ended 30 June, earnings dipped to US$24.7m from $24.5m last year, while gross margin expanded 130 basis points to 37.2%, compared to 35.9% in the same period last year. Net sales were up 0.6% to $325.4m, while same store sales grew 5.4%. Despite the growth, CEO Edward Rosenfeld said the company is seeing "softer than anticipated trends" in its private label footwear business and with certain international distributors. The company now expects net sales for 2016 to increase 0% to 1% compared to 2015.
Footwear business Weyco has booked a drop in earnings and sales in what the company described as a "challenging" second-quarter. Net profit amounted to US$1m from $2m in the year ago quarter. Gross margin widened to 32.6% of net sales from 31% last year, while revenues fell 11% to $56.9m. North American retail sales were down 6% to $4.7m, with same-store sales down 2%. CEO Thomas Florsheim, said: "In addition to the reduced demand for our BOGS product following last year's mild winter, our retail partners saw a slowdown in traffic and a weaker sales trend, which resulted in a general concern about inventory levels which impacted our other three brands."
Black Diamond, Inc
Outdoor equipment and apparel business Black Diamond continued to experience foreign exchange challenges in the second quarter, particularly with the euro, which impacted both revenue and gross margin. Net losses narrowed slightly to US$3.2m from $3.8m. Gross margin was down 640 basis points to 28.6% due to foreign currency headwinds, an unfavourable mix in lower margin products, and costs associated with the continued ramp of its recently repatriated manufacturing activities from Asia to the US. Sales were down 3% to $29.1m.
Columbia Sportswear Inc
Columbia Sportswear has booked record second-quarter sales of US$388.8m, a 2% increase on revenues of $380.2m a year earlier. Net losses totalled $8.2m, higher than losses of $5.8m in the prior year. The company reaffirmed its full-year outlook of mid-single-digit percentage net sales growth, and a high-single-digit percentage increase in net income to between $184m and $191m. CEO Tim Boyle said: "Our successful first-half results were highlighted by solid growth from three of our four major brands and improved gross margins in a challenging global environment."
US apparel and footwear company Rocky Brands says it is disappointed in its results for the three months to 30 June, which swung to a loss of US$1.8m, for the three months to 30 June, compared to a profit of $2m last year. Sales fell 9% to $62.6m from $68.6m last year. Wholesale sales declined 23% to $41.5m from $53.9m, while retail sales were down 2% to $10.4m from $10.2m. Military segment sales jumped 139% to $10.7m compared to $4.5m. Gross margin dropped 700 basis points to 26% from 33% as the increase in military segment sales carry lower gross margins than the company's wholesale and retail segments.
Brand management company Sequential Brands has reiterated its fiscal year guidance after posting a 69% hike in second-quarter sales. Revenue for the three months to 30 June increased to $34.2m, compared to £20.2m in the same period last year. Net income reached $3.6m, compared to $3.3m on a non-GAAP basis. Sequential Brands now continues to expect US$155m to $160m in revenue, GAAP net income of $12.7m to $14.6m and adjusted EBITDA of $88.0m to $91.0m.
Skechers USA Inc
Skechers saw its shares tumble around 12% on the release of its second-quarter results that fell short of analyst estimates. The company reported earnings of US$74.1m, or $0.48 per share, on revenues of $877.8m. Wall Street Journalist analyst had expected earnings of $0.52 on revenue of $888.9m. In the year ago period, earnings amounted to $79.8m on revenues of $800.5m. Earnings were negatively impacted by foreign currency translation, exchange losses, and losses from a fire at its Malaysia warehouse. Gross margin widened to 47.4% from 46.8% thanks to higher sales in its international subsidiary, joint venture businesses and company-owned retail stores.
Under Armour, Inc
Under Armour continues to post strong topline gains, with sales up 28% in the quarter to US$1bn. The performance didn't, however, filter through to the bottom lie where earnings plummeted 58% to $6m as a result of a $23m impairment related to the liquidation of Sports Authority. Gross margin narrowed slightly to 47.7% from 48.4%, primarily due to negative impacts of around 130 basis points from sales mix driven by strong growth in footwear and international, partially offset by around 50 basis points from improved product cost margins. Despite the challenges, analysts believe the company has good growth potential across both its international and domestic businesses where sales were up 68% and 22%, respectively.
US clothing and footwear business Wolverine Worldwide said it has delivered better-than-expected results for the second quarter, reaffirming its forecast for the year. Reported revenue of US$583.7m was in line with expectations, declining 7.4% versus the prior year. Reported gross margin narrowed to 38.8%, compared to 39.1% in the prior year, and 39.8% on a constant currency basis, an increase of 70 basis points versus the prior year. For the full year, Wolverine said it expects revenue in the range of $2.47bn to $2.57bn, and adjusted diluted earnings per share in the range of $1.30 to $1.40.
Children's wear maker Carter's Inc said it has achieved its sale and earnings objectives in its second quarter despite lowering its full-year EPS guidance to growth of 5-6% from previous growth of 6-7%. Earnings in the quarter increased 0.3% to US$36.2m, while operating margin decreased around 20 basis points to 9.9%. Net sales grew 4.4% to $639.5m, reflecting growth in the company's US Carter's and OshKosh retail as well as in its international segment.