US Q3 in brief – TJX Companies, Inc, Differential Brands, Phoenix Footwear, JC Penney
In the most recent third-quarter filings from US apparel and footwear brands and retailers, Crocs booked revenue in-line with guidance and narrowed its losses, Nordstrom moved back into positive sales territory but moved to a net loss. Macy's saw both earnings and sales fall in the quarter, while Kohl's booked mixed results and Dillard's saw both earnings and sales tumble.
TJX Companies, Inc
TJX Companies has revealed third-quarter earnings and sales that significantly exceeded company expectations thanks to strong customer traffic and comps. Net income fell 6%(??) to US$549.8m, down from $587.3m in the prior year. Gross margin was up 0.5 percentage points to 29.5%, thanks to a strong increase in merchandise margins and gains related to the company's inventory hedges. Net sales were up 7% to $8.3bn, while comparable sales increased 5%. CEO Ernie Herrman, said: "We are extremely pleased that our strong momentum in customer traffic and sales continued in the third quarter. We remain laser focused on achieving our goals for 2016 and are passionate about surpassing them. We are on our way to becoming a $40bn-plus company."
Differential Brands Group, which owns Robert Graham and Hudson Clothing, moved to a loss in its third-quarter, with earnings hampered by merger related expenses associated with the Robert Graham merger and the acquisition of Swims. For the period ended 30 September, net losses were US$2.8m, compared to a net income of $36,000 last year. Net sales meanwhile, were up to $41.2m from $17.6m in the prior year period, primarily driven by the inclusion of $19.5m from the addition of sales from Hudson and $3.5m from the addition of sales from Swims. Gross margin fell to 49.4% compared to 62.3% in the third quarter of fiscal 2015, primarily as a result of the addition of the Hudson and Swims Wholesale businesses, whose products generate lower gross margins than Robert Graham, the company said.
Michael Buckley, CEO, said: "We were pleased with the progress we made in the strategic initiatives associated with each of our brands. Looking ahead, we remain focused on growing our brands organically and acquiring new premium brands that are accretive and complementary to our portfolio."
Phoenix Footwear Group, Inc.
Phoenix Footwear broke even in its third-quarter as it moved from a loss of US$45,000 in the year ago quarter. Gross margin improved 540 basis points to 38.6% from 33.2% in the prior year, thanks to a reduction in air freight and other negative purchase price variances when compared to last year's quarter. Net sales, however, dropped 1% to $5.8m compared to $5.82m for the third quarter of fiscal 2015. This was primarily driven by lower sales in the catalog, online and national retail channels that were partly offset by increases in the company's e-commerce and other internet-based accounts.
JC Penney Company
Retail giant JC Penney said it experienced a softness in apparel sales in its third-quarter but reported an improvement in net losses, which amounted to US$67m from a loss of $115m in the year ago quarter. In August, the company unveiled a three-year turnaround plan for accelerated growth that focuses on advancing its omni-channel execution and driving private and exclusive brand penetration. Total sales were down 1.4% to $2.86bn, while comparable sales were down 0.8% for the period. Gross margin declined 10 basis points to 37.2% of sales. For the full year, the company is forecasting comparable sales growth of 1-2%, and gross margin to be flat.
Dillard's saw both earnings and sales tumble in its third quarter, with sales pressuring gross margin and net income performance. Earnings dropped 50% to US$22.8m, compared to $45.7m last year, which included a net after-tax credit of $6m related to the sale of three store locations. Gross margin, meanwhile, narrowed to 35.6% from 36.4%. Net sales fell to $1.37bn from $1.44bn. Although all categories declined, sales trends were strongest in juniors' and children's apparel, ladies' apparel and men's clothing and accessories, with weaker performances from ladies' accessories and lingerie, cosmetics and shoes. In terms of geography, sales were strongest in the western region, followed by the central and eastern regions, respectively.
Upscale US fashion retailer Nordstrom has booked mixed results in its third-quarter as it moved back into positive sales territory following declines earlier this year, but swung to a net loss on a $197m goodwill impairment. Net sales were up 7.2% to $3.5bn from $3.2bn a year earlier, while comparable sales climbed 2.4%. Net losses amounted to $10m from earnings of $81m in the year ago period. Gross margin, meanwhile, improved 93 basis points to 34.8%, reflecting strong inventory execution, which resulted in net sales growth outpacing inventory growth, in addition to leverage of buying and occupancy costs.
Department store retailer Macy's saw both earnings and sales fall in its third-quarter but reaffirmed its guidance for the full year. Earnings fell 87% to $17m from $118m a year earlier. Gross margin remained flat at 39.8%, while net sales totalled $5.63bn, drop of 4.2% on the prior year period. Comparable sales on an owned plus licensed basis were down by 2.7% in the quarter. Despite this, the company said it remains confident in its previously provided full-year earnings per share guidance and expects full-year sales to be better than its prior guidance.
Department store retailer Kohl's has booked a mixed third-quarter as earnings climbed but sales fell, despite a strong back-to-school season. Net profit amounted to US$146m, a 21.6% increase on earnings of $120m in the prior year. Gross margin was flat at 37.1%. Net sales, however, dropped 2.3% to $4.33bn. CEO Kevin Mansell, said: "We are pleased to see continued improvement in our sales trends. Our back-to-school season was strong, followed by a soft September, and progressive improvement throughout October. We are encouraged by these trends as we enter the Holiday season." The company reaffirmed its fiscal 2016 diluted earnings per share guidance of $3.12 to $3.32 per diluted share.
US footwear firm Crocs booked revenue in-line with guidance at US$245.9m from $274.1m a year earlier. On a constant-currency basis, revenues fell 11.6%. GAAP net losses narrowed to $5.4m from $27.8m in the prior year. CEO Gregg Ribatt said: "We continue to manage our business tightly in what remains a challenging consumer environment. Looking ahead, we continue to plan conservatively given the current top-line headwinds. We are working hard to drive quality growth through our product, marketing, and distribution strategies and we remain confident that the steps we've taken to build a better business model will result in increased profitability and greater shareholder value."
Iconix Brand Group
Brand management company Iconix Brand Group booked what it said was another "solid" quarter. Performance across the company's brands was mixed, with GAAP net income reaching US$15.2m from a loss of $5.4m a year earlier, while licensing sales remained flat at around $90.9m. Operating income jumped 46% to $40.7m thanks to the men's segment, which had fewer charges and a large write-off of bad debt the prior year. CEO John Haugh noted: "Performance across the brands was mixed, but with our balanced portfolio of brands and the company's attractive margins, we were able to achieve stable revenue, increased profits and healthy free cash flow."
Footwear business Weyco saw a drop in both earnings and sales in its third-quarter, with a particularly poor performance in the group's North American wholesale division. Net earnings dropped to US$4.6m from $5.5m a year earlier, while sales fell 13% to $79.1m. Sales in the North America retail segment, including the company's Florsheim stores and its internet business in the US, were down 1% to $4.7m. Same store sales were up 2%, but wholesale sales dropped 17% to $62.2m as a result of lower sales of the Stacy Adams, Nunn Bush and BOGS brands.
Brand management company Sequential Brands reiterated its revenue guidance for the full year after posting an 83% hike in third-quarter sales. Revenue for the three months to 30 September increased to US$42m, compared to $23m in the same period last year. Net income reached $7.5m, compared to $5m on a non-GAAP basis. Sequential Brands continues to expect US$155m to $160m in revenue, but is now expecting GAAP net income of $7.7m to $11m, compared to previous forecasts of $12.7m to $14.6m. Meanwhile, adjusted EBITDA is now expected at $83m to $88m, compared to $88.0m to $91.0m, primarily due to costs associated with its headquarter lease, which were expected to be partially offset, and augmented investment in operating resources in targeted areas of the company.
Outdoor equipment and apparel business Black Diamond reaffirmed its full-year outlook after trimming its third-quarter loss thanks to reduced expenses. Net losses improved to $0.4m from $50.8m a year earlier, while gross margin narrowed to 31.3% from 36%. Foreign currency headwinds accounted for 190 basis points of the decline. Sales edged up to $39.4m versus $39.3m a year ago. For the full year the company expects sales in the region of $145-$150m. As a result of the higher costs due to the repatriation of the company's Chinese manufacturing assets and improvements to its manufacturing facilities in Salt Lake City, gross margin is expected to be around 30% compared to 34.9% in 2015.
Online retail giant Amazon delivered strong growth in the third-quarter, with a 29% rise in sales to US$32.7bn, compared to $25.4bn in the same period last year. For the three months ended 30 September, the company recorded a profit of $252m, up 219% from $79m last year. The company expects fourth-quarter sales growth of between 17% and 27%, or between $42bn and $45.5bn.
"Amazon remains an impressive player and a threat to many other retailers," said Neil Saunders, CEO of Conlumino. "It is still growing its market share, especially in more embryonic categories like fashion. Looking ahead we see no reason for the dominance of Amazon to diminish."
Columbia Sportswear said the combined effects of a shift in the timing of shipments of US wholesale advance orders, coupled with bankruptcies of some US wholesale customers during 2016, hit its third-quarter results. For the period to 30 September, the company booked sales of US$745.7m, a 3% decline compared to $767.6m last year. Meanwhile, third-quarter income totalled $83.6m, an 8% decline compared to $91.1m last year. The company expects full year 2016 net sales growth of approximately 4%, and expects net income after non-controlling interest to increase up to 8% to between $180m and $187.5m.
Underwear and activewear maker Hanesbrands delivered strong growth in the third-quarter, with an 11% rise in sales to US$1.76bn, compared to $1.59bn in the same period last year. Hanes said the increase was driven by core organic Innerwear growth and strong acquisition-related international growth. Meanwhile, the company recorded a profit of $173.9m, up 7.2% from $162.2m last year. The company has narrowed its 2016 full-year guidance, and now expects net sales growth of $6.15bn to $6.18bn, and adjusted EPS of $1.89 to $1.92.
"Our business is unfolding as expected this year, and we remain confident in our ability to deliver on our full-year guidance," says Hanes CEO, Gerald Evans Jr.
US apparel and footwear company Rocky Brands said it is disappointed in its results for the three months to 30 September, which saw earnings drop to US$0.4m from $1.8m last year. Sales meanwhile increased 4.6% to $732m from $70m. Wholesale sales declined 3.2% to $52.9m from $54.7m, while retail sales were flat at $10.3m. Military segment sales almost doubled to $10.1m compared to $5.1m. Gross margin dropped 460 basis points to 27% from 31.6% as military segment sales carry lower gross margins than the company's wholesale and retail segment.
Children's apparel retailer Gymboree Corp said the three months ended 30 July proved to be difficult, despite moving to a profit of $40.8m from a loss of $25.4m in the year ago period. Sales fell 4% to US$250.3m from $261.8m the year before, and comparable sales fell 2%. The company has lowered its full-year guidance, forecasting adjusted EBITDA of $85m to $105m compared to previous expectations of $120m to $135m.
Under Armour delivered its 26th consecutive quarter of 20%-plus revenue growth, with sales increases in all of its divisions. Net sales were up 22% in the third quarter to $1.47bn, with footwear recording the largest growth, at 42% to $279m. Apparel sales were up 18% to $1.02bn, while accessory sales grew 18% to $122m. Earnings in the period increased 28% to $128m. Gross margin, meanwhile, narrowed slightly, to 47.5% from 48.8% a year ago, primarily reflecting negative impacts from the liquidation of Sports Authority, increased promotions and foreign exchange rates, partially offset by continued product cost margin improvements. For the full year, the company is forecasting total sales of around $4.92bn, representing growth of 24% over 2015.
Footwear maker Skechers achieved a new third-quarter sales record, and the second highest sales quarter in its 24-year history. Revenues of $942.4m were up 10.1% on last year, although the company reported an earnings decline of 2.2% to US$65.1m, hurt by foreign currency translation and exchange losses of around $8.1m. Gross margin widened to 45.6% from 45.2%, primarily due to slightly higher domestic wholesale margins offset by slightly lower global retail margins. For the fourth quarter of 2016, the company expects net sales in the range of $710m to $735m.
VF Corp said it is not satisfied with its third-quarter results, as it revealed higher earnings but lower sales as a result of "especially sluggish retail conditions" in the Americas, its largest market. As a result, the company slashed its full-year outlook. It now expects 2016 revenue to increase 2% to around $12.2bn compared with the previous estimate of 3% to 4% growth. Earnings per share are expected to rise 3% to $3.13 compared with previous guidance of a 5% rise to $3.20. For the quarter, earnings amounted to US$498.5m from $459.9m a year earlier. Gross margin was up 70 basis points to 48.4%, but total sales were down 1% to $3.5bn.
"We remain sharply focused on operational improvements and taking advantage of this environment to accelerate strategies to create sustainable, long-term growth opportunities for our brands," said CEO Eric Wiseman.