US Q1 in brief – JC Penney, Foot Locker, Cato Corp
US Q1 in brief – JC Penney, Foot Locker, Cato Corp | Apparel Industry News | just-style
In the most recent first-quarter filings from US apparel and footwear brands and retailers, Walmart delivered an encouraging start to the year thanks to higher sales, while Ross Stores booked growth despite market volatility. Kate Spade, meanwhile, saw earnings slump on the back of sales declines, while Hudson's Bay recorded comparable store declines on the back of lower domestic store traffic across all banners.
Retail giant JC Penney said it saw an improvement in women's apparel, despite widening its net loss to US$180m in the first quarter, compared to net loss of $68m in the year-ago period. For the three months ended 29 April, gross margin was up 10 basis points to 36.3 %, positively impacted by improved selling margins throughout the quarter, which was partially offset by the continued growth in the company's online and major appliance businesses. Net sales meanwhile, slipped 3.7% to $2.7bn from $2.8bn last year. Comparable store sales were down 3.5% for the quarter.
CEO Marvin Ellison, said: "We continue to make encouraging progress in the company's competitive and financial position despite our top-line performance during the first quarter. While February was a very challenging month for JCPenney and broader retail, we are pleased with our comp store sales for the combined March and April period, which improved significantly versus February."
US footwear retailer Foot Locker said its first-quarter was one of the company's most profitable in its history, despite a slip in net income and falling short of its original expectations. For the period ended 29 April, net income was US$180m, compared to $191m in the year-ago period. Total sales meanwhile, increased 0.7% to $2bn, compared with sales of $1.99bn for the corresponding prior-year period. Comparable-store sales were up 0.5%, while gross margin decreased to 34% from 35% a year ago.
CEO Richard Johnson said: "The slow start we experienced in February, which we believe was largely due to the delay in income tax refunds, was unfortunately not fully offset by much stronger sales in March and April. Nonetheless, we believe our banners remain at the centre of a vibrant sneaker culture. We are confident that our customers have not lost their tremendous appetite for athletic footwear and apparel and that our position in the industry is stronger than ever."
Cato Corp reported a fall in both sales and earnings for the first quarter, with net income slipping 38% to US$22.2m from $35.9m last year. First-quarter gross margin decreased 390 basis points to 38.7%, primarily due to lower merchandise margins and deleveraging of buying and occupancy costs. Meanwhile, total sales fell to $239.7m, compared to $288m in the year-ago period. Same-store sales were also down, slipping 17%.
CEO John Cato said: ""Our negative sales trend persisted throughout the first quarter, impacting margins and earnings as we continued to work through our merchandise missteps," stated John Cato, Chairman, President, and Chief Executive Officer. "It is taking longer to work through these issues than expected and the remainder of the year will be impacted. We expect earnings for the year to be below last year."
The Buckle booked a drop in both earnings and sales in the first quarter, with the former dropping to US$16.3m from $23.1m a year earlier. Revenues were down 12.8% to $212.3m from net sales of $243.5m for the year-ago period, while comparable sales fell 12.7%. Online sales were down 7.2% to $21.8m for the 13-week period ended 29 April.
The Buckle also announced senior vice president of finance and CFO, Karen Rhoads,who joined the company in 1980, will retire later this summer. Rhoads will continue to serve as a member of the company's board of directors. The board has engaged an executive search firm to assist with the search for Rhoads' replacement.
The Bon-Ton Stores
US department store retailer The Bon-Ton Stores widened its net loss to US$57.3m in the first quarter, compared to $37.8m in the year-ago period. The York, Pennsylvania-based company saw total sales fall by 9.3% to $536.1m from $591m in the first quarter of fiscal 2016. Comparable store sales decreased 8.8% as compared with the prior year period. Meanwhile, gross margin decreased 170 basis points to 32.2% compared to last year, primarily due to an increase in the markdown rate and increased delivery expenses.
CEO Kathryn Bufano said: "Our first quarter results did not meet our expectations due primarily to weak mall traffic trends, unfavourable weather and marketing challenges associated with the Easter calendar shift."
Ross Stores booker higher sales and earnings in its first-quarter despite uncertainty and volatility in the market. Earnings reached US$321m from $291m a year earlier. Total sales were up 7% to $3.3bn, while comparable store sales grew 3%. Operating margin of 15.2% exceeded company expectations due to above-plan sales and merchandise margin. For the second quarter, the company is forecasting same store sales to be up 1% to 2%, on top of a 4% gain last year, with earnings per share of $0.73 to $0.76, up from $0.71 in the prior year period.
Stage Stores widened its net loss to US$19m from $15.5m in the first quarter as the company incurred after-tax charges primarily associated with the Gordmans acquisition of about $4m. Net sales were also down, falling 7.3% to $308.6m, compared to $332.8m in the prior year. Meanwhile, comparable sales decreased 9.6%.
CEO Michael Glazer, noted: "After a challenging February in which we saw negative double digit comps, we began to gain momentum and our business improved significantly during the combined March and April period. While we expect retail headwinds to continue in the near term, we believe that our selective acquisition of prime Gordmans' assets allows us to diversify with an off-price business model. We expect the acquisition to add scale to our business and be meaningfully accretive to our earnings in 2018."
Perry Ellis said it was pleased with a "solid start" to fiscal 2018, with top and bottom line results surpassing guidance, reflecting solid growth in its core brands driven by the earlier shipment of Spring merchandise and strong gross margin expansion. For the three month period, as reported under GAAP, net income was US$12.8m, compared to GAAP net income of $14.3m last year. GAAP Gross margin expanded 120 basis points to 37.6%, while adjusted gross margin expanded 90 basis points. Meanwhile, total sales dropped 7.3% to $242m from $261m last year, but ahead of guidance of $230mto $235 million. The company said the decline reflected a planned decrease in shipments given a reduction of customers' doors and inventory discipline to drive higher margin sales.
Walmart has delivered what analysts say is an encouraging start to the year as sales grew 1.4% in the quarter to US$117.5bn. Excluding currency, sales were up 2.5% to $118.8bn. In its domestic market revenues were up 2.9% to $75.4bn, while international sales climbed 3.5% to $27.1bn. Net earnings, meanwhile, were down 1.3% in the period to $3.04bn. "We delivered a solid first-quarter and we're encouraged by the start to the year. We're moving faster to combine our digital and physical assets to make shopping simple and easy for customers," said CEO Doug McMillon.
The Children's Place
The Children's Place has booked what it says are "outstanding" operating results in the quarter with comparable sales, operating margin and earnings significantly above last year and the high end of its guidance. Net sales increased 4.1% to US$436.7m on the back of a comparable retail sales increased of 6.1%. Operating margin improved 170 basis points to 11.1%, while net income reached $36.2m from $26m a year earlier.
American Eagle Outfitters
American Eagle Outfitters booked a mixed first-quarter as earnings slipped but sales increased. For the period ended 29 April, net income fell to US$25.2m from $40.5m last year. Gross margin decreased 270 basis points to 36.5% from 39.2% last year, primarily due to increased promotional activity and higher shipping costs related to a strong digital business. Meanwhile, total net revenue was up 2% to $761.8m, compared to $749.4m in the year-ago period. Consolidated comparable sales were also up 2%, following a 6% increase last year.
CEO Jay Schottenstein said: "The first quarter results reflected mall traffic headwinds, especially early in the quarter, with improved trends over Easter and a strong digital business throughout. As we look ahead, we are taking the right steps to improve our results and adjust our business for today's rapidly evolving retail environment."
L Brands booked a fall in both sales and earnings for the first quarter, with net income slipping to US$94.1m from $152.3m last year. For the three months ended 29 April, net sales fell 7% to $2.44bn compared to $2.61bn in the year-ago period. Comparable sales were also down, falling 9%. L Brands noted the exit of the swim and apparel categories had a negative impact of 6 percentage points and 9 percentage points to total company and Victoria's Secret comparable sales, respectively. Looking ahead, the company increased its guidance for 2017 full-year earnings per share to $3.10 to $3.40 from $3.05 to $3.35 previously, and issued guidance for second quarter earnings per share between $0.40 and $0.45.
US retail group Target said its first-quarter financial performance was "better" than its expectations, as net earnings rose 7.7% to US$681m from $632m in the year-ago period. For the three months ended 29 April, sales slipped 1.1% to $16.0bn compared to $16.2bn last year, reflecting a comparable sales decline of 1.3%, partially offset by the contribution from new stores. Digital channel sales however increased, up by 22% and contributing 0.8 percentage points to comparable sales growth. Gross margin narrowed to 30.5%, compared with 30.9% in the year-ago period, reflecting increased digital channel fulfilment costs.
CEO Brian Cornell, said: "We are in the early stage of a multi-year effort to position Target for profitable, consistent long-term growth, and while we are confident in our plans, we are facing multiple headwinds in the current landscape. As a result, we will continue to plan our business prudently while preparing our team to chase business when we have an opportunity."
Teen retailer Urban Outfitters saw net income slip 59.8% in the first quarter, falling to US$11.9m from $29.6m in the year-ago period. Net sales were also down in the period, falling 0.2% to $761.2m compared to $762.6m last year. Total comparable retail segment net sales decreased 3.1%. By brand, comparable sales increased 1.5% at Free People, but decreased 3.1% at Urban Outfitters and 4.4% at the Anthropologie Group. The company said comparable sales were driven by strong, double-digit growth in the direct-to-consumer channel, but were offset by negative retail store comparable net sales.
CEO Richard Hayne, said: "During the first quarter we continued to see strong double-digit growth from our direct-to-consumer channel and our wholesale business. We believe we have significant opportunity to continue to grow both of these channels at all of our brands."
Dick's Sporting Goods
Omni-channel sporting goods retailer Dick's Sporting Goods said that despite a challenging retail environment, it realised growth across each of its three primary categories of hardlines, apparel and footwear in the first quarter. For the period ended 29 April, net income reached US$58.2m compared to $56.9m in the year-ago period. Net sales were also up, increasing 9.9% to $1.8bn from $1.7bn last year. Looking ahead, CEO Edward Stack said the company will continue to "evaluate and adjust" its business model, and is taking actions to reduce its expense structure in order to fund and develop its longer-term strategic initiatives.
TJX Companies said it has great confidence in the continued, successful growth of the company after booking increases in both sales and earnings in the first quarter. For the period ended 29 January, net income reached US$536.3m, compared to $508.3m in the year-ago period. Gross profit margin was 29.0%, up 0.2 percentage points versus the prior year. Net sales meanwhile, increased by 3% to $7.8bn from $7.5bn last year, while consolidated comparable store sales increased 1%.
Differential Brands Group
Differential Brands Group, which owns Robert Graham and Hudson Clothing, narrowed its net loss in the first quarter. For the period ended 31 March, net loss was US$2.4m, compared to $6.5m for the prior year period. Net sales meanwhile, were up 19% to $40.1m from $33.7m in the prior year period, reflecting a 22% increase in wholesale segment sales and a 9% increase in consumer direct segment sales. The company added the sales increase was primarily due to sales from the addition of the Hudson Jeans and Swims brands for the full period. Gross margin fell to 46.4% compared to 48.5%last year, reflecting the inclusion of Hudson Jeans for the full quarter as well as the inclusion of Swims, which carry lower gross margin rates as primarily wholesale businesses.
CEO Michael Buckley said the company is "pleased" with the progress it has made during the quarter, especially in its e-commerce business, which saw a 46% sales increase.
Dillard's has booked a drop in earnings and sales in its first-quarter, with net income falling to US$66.3m from $77.4m in the year-ago period. Net sales dropped to $1.42bn from $1.50bn a year earlier, while gross margin from retail operations improved 65 basis points.
CEO William Dillard said that while the company's sales decline weighed heavily onits operating results, it still ended the quarter with $302m of cash, largely due to better cash management.
Upscale US fashion retailer Nordstrom has booked first-quarter earnings in line with expectations. For the period ended 29 April, net earnings were up 37% to US$63m, from $46m in the year ago period. Net sales were also up, rising 2.7% to $3.3bn, compared to $3.2bn last year, while comparable sales slipped by 0.8%. This was consistent with trends experienced over the past year, Nordstrom said. Meanwhile, online sales were 24% of total net sales, driven by 11% growth at Nordstrom.com and 19% at Nordstromrack.com/HauteLook.
Hudson's Bay Company (HBC) has booked a drop in comparable sales in what it described as a difficult first-quarter, particularly in the US where the group has experienced lower store traffic across all its banners. On a constant currency basis, consolidated comparable sales were down 2.9%. DSG (Hudson's Bay, Lord & Taylor, and Home Outfitters) saw sales fall 2.4%, while Saks Fifth Avenue sales fell 4.8%. In Europe, HBC sales were remained flat. Comparable digital sales were up 5.4%.
US department store retailer Macy's says its first-quarter sales and earnings results were consistent with its expectations, and that it remains on track to meet its 2017 guidance. Earnings in the period dropped to $71m from $115m last year, while gross margin narrowed to 38.1% from 39.1% in the prior year period. Sales totalled $5.34bn, a drop of 7.5% on sales of $5.77bn in the same period last year, reflecting, in part, store closures. Comparable sales on an owned basis were down 5.2%.
US department store retailer Kohl's has booked mixed first-quarter results as earnings climbed but sales fell. Earnings were up 14% to US$66m from $58m a year earlier, while gross margin improved 83 basis points to 36.4%. Sales, meanwhile, were down 3.2% to $3.84bn. CEO Kevin Mansell, however, said there had been a "significant improvement" in sales and traffic for the March and April period, after a weak February. "Continued strong inventory management led to a major improvement in gross margin, and our teams managed expenses exceptionally well."
Wolverine Worldwide booked what it says was a solid start to the year with earnings and sales that beat expectations and strong progress towards its strategic transformation plan. Revenues dropped 4.8% to US$591.3m due to an additional week of operations in the first quarter of 2017. Underlying revenue declined 2%. Earnings dropped to $16.7m from $17.4m, while gross margin widened slightly to 39.7% from 39.6% last year.
"The transformation of our business is well underway with our strategy focused on elevating our most powerful brands with consumers, delivering continuous product innovation and sustained organic growth, and unlocking incremental operational efficiencies, with an emphasis on pace and speed," said CEO Blake Krueger.
Iconix Brand Group
Iconix moved to a loss in its first-quarter on the back of declining sales as the the company looks to implement initiatives aimed at improving its balance sheet and driving organic growth. Losses amounted to US$4.3m from earnings of $18.6m a year earlier. Operating income declined 27% to $33.6m, while licensing revenue fell 13% to $58.7m. Separately, Iconix announced the sale of its entertainment segment for $345m in cash.
US value fashion retailer Citi Trends said total sales in the 13 weeks to 29 April increased 3.2% to US$200m, compared to $193.7m in the year-ago period. Comparable store sales meanwhile, were up 1% from the first quarter of fiscal 2016.
Acting CEO Bruce Smith, said: "We are pleased to report that our improved merchandising strategies are driving better performance, as demonstrated by the increase in our first quarter comparable store sales. After a very slow start to the quarter due to the later disbursement of tax refunds by the Internal Revenue Service, we were able to more than make up February's 21% comparable store sales decline with increases of 13% in March and 18% in April."
Weyco saw both sales and earnings slip in its first-quarter in the face of what it called a "challenging" retail environment. For the three months to 31 March, net earnings attributable to the company fell 17% to US$2.2m from $2.7m in the year-ago period. Meanwhile, net sales for the quarter slipped to $69.1m, down 12% from $78.9m last year.
CEO Thomas Florsheim Jr said: "The retail environment continues to be challenging, as retailers address reduced foot traffic in their brick and mortar stores. We continue to seek growth across all trade channels and are working to reduce our costs. This quarter we saw higher gross margins and reductions in several categories of selling and administrative costs as a result of our efforts."
US fashion retailer Hanesbrands said it is off to the strong start of 2017 that it sought, despite net income slipping 12% to US$70.6m from $80.3m in the year-ago period. Net sales meanwhile, increased 13.2% to $1.38bn from $1.22bn last year, thanks to acquisition contributions. Sales for the activewear and international segments increased, while sales decreased as expected for the innerwear segment and manage-for-cash businesses. Hanes has also launched a multiyear initiative to increase investment for growth, reduce costs, and drive cash flow. Project Booster, is expected to drive the company's Sell More, Spend Less, Generate Cash business strategy and is expected to generate about $100m in annualised net cost savings, and $300m of incremental annual net cash from operations after annualised growth reinvestment of $50m.
The company has also recently announced the departure of CFO Richard Moss who will retire at the end of 2017. Hanesbrands has initiated an internal and external search for his successor.
US apparel giant VF Corporation said its first-quarter results were "right in line" with expectations, despite a 2% fall in both sales and earnings for the period. Net income fell to US$209.2m in the three months to March, from $260.3m the year before. As a result of the sale of its licensed sports group business to Fanatics, VF's net loss from discontinued operations was $5.5m the first quarter of 2017. Gross margin improved 150 basis points to 50.2% on a reported basis, while total revenues fell to $2.55bn from $2.60bn in the year-ago period. Brand revenue at Vans was up 5% and by 6% at The North Face., but fell 5% at Timberland. For fiscal 2017, VF Corp is forecasting revenue to increase at a low single-digit percentage rate.
Columbia Sportswear has revealed record first-quarter net sales of US$543.8m, a 4% increase compared with net sales of $525.1m last year. Net income also reached record levels, up 13% to $36m from $31.8m in the year ago period. For the year ahead, the company expects net sales growth of around 3%, and net income of between $192m and $199m.
CEO Tim Boyle said: "Our first quarter results provide a good start to a year that presents many challenges, especially in the US, which has been impacted by customer bankruptcies, liquidations and ongoing efforts by US.retailers to rationalise their store fleets and square footage. We were encouraged by the Columbia brand's continued growth in Europe-direct markets during the first quarter and by the Sorel brand's successful launch of an expanded Spring assortment. In addition, our direct-to-consumer businesses were a source of growth in every region.
"In the midst of changing consumer shopping patterns, our portfolio of powerful brands and strong balance sheet give us the ability to continue to drive sustainable, profitable growth."
Online retail giant Amazon has booked increases in both sales and earnings in its first-quarter thanks to new product and service launches globally, including seven private apparel brands to Prime members. Net income reached US$724m from $513m a year prior. Net sales were up 23% to $35.7bn. Excluding a $492m unfavourable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 24%.
Under Armour's share price has spiked after the athletic wear maker posted a first-quarter loss that was better than analyst expectations and reaffirmed its full-year outlook. The loss for the three months to the end of March amounted to US$2.3m from earnings of $19.2m a year ago. Gross margin dropped 70 basis points to 45.2%. Net sales, however, grew 7% to $1.1bn. "Our first quarter results were in line with our expectations and we're off to a solid start in 2017," said Under Armour CEO Kevin Plank. "By proactively managing our growth to deliver superior innovative product, continuing to strengthen our connection with consumers and increasing our focus on operational excellence - we have great confidence in our ability to drive toward our full year targets."
Carter's booked a mixed first-quarter, with a slight rise in sales but a 13.6% decrease in net income from US$54m to $46.7m. Operating margin also decreased, falling 210 basis points to 10.7%. Net sales, meanwhile, grew 1.2% to $732.8m, reflecting growth in the company's domestic retail and wholesale sales, which was partially offset by a decline in International sales. CEO Michael Casey, said: "We achieved our sales and earnings objectives in the first quarter. Stronger than planned demand in our wholesale and ecommerce businesses helped to offset the effects of delayed tax refunds to families with young children and a later Easter holiday.
"We have seen a meaningful improvement in sales trends in April, driven by Easter holiday shopping, and expect good growth in sales and earnings in the balance of the year."
US footwear and accessories specialist Steve Madden said it pleased to have started off 2017 with a strong first-quarter, despite delivering a 15.6% drop in earnings. For the three months ended 31 March, net income fell to US$20.2m from $23.7m last year. However, the company said its highlight of the quarter was its Steve Madden women's wholesale footwear division, which enjoyed a period of "outstanding growth in a challenging retail environment". Net sales increased 11.2% to $366.4m, compared to $329.4m in the year-ago period. Gross margin widened to 36.2%, compared to 35.3% last year. CEO Edward Rosenfeld said the company will take a prudent approach to planning its business in light of retail industry headwinds, but added the strength in its core business "gives us confidence that we are well-positioned to navigate the uncertain environment".
Despite first-quarter net sales representing a new quarterly record and the first time the company has exceeded US$1bn in quarterly sales, footwear maker Skechers saw earnings slip in the three months ended 31 March. Sales in the quarter were up 9.6% to $1.07bn on last year, primarily due to a 16.8% increase in the company's international wholesale business and a 12.8% rise in its company-owned global retail business which included comparable same-store sales increases of 2.9%. However, earnings slipped 3.7% to $94m, compared to $97.6m in the year-ago period.
CEO David Weinberg said: "We are particularly proud of the growth in the quarter considering the tough comparison to 2016, which included the benefit of an additional day in February and Easter falling in March."
Rocky Brands says it has made a "solid start" to 2017 as it moved to a profit thanks to doubling its military segment sales to a quarterly record US$12m. Net income in the three months ended 31 March amounted to $1.5m from a loss of $0.2m a year earlier. Net sales meanwhile, increased 9.6% to $63.1m, compared to $57.5m in the year-ago period. Wholesale sales declined 2.5% to $39.2m, while retail sales edged up to $11.9m from $11.5m. Gross margin dropped 160 basis points to 31.3%, driven by the increase in military segment sales which carry lower gross margins than its wholesale and retail segments.
CEO Mike Brooks said: "The actions we have taken over the past six months to better position the company for profitable growth are clearly gaining traction. While there is still work ahead of us in order to maximise shareholder value over the long-term, we are confident we are heading in the right direction."
Kate Spade & Co
Kate Spade saw earnings slump to US$1.4m in the three months ended 1 April, from $11.6m a year earlier. The company incurred a $7m of pre-tax store impairment charge and $2m of pre-tax fees and expenses related to its strategic review. Gross margin widened to 63.2% from 61.8%, but net sales dropped 1.2% to $271m. Same-store sales fell 2.4% for the quarter, and were down 8.1% excluding e-commerce. Direct-to-consumer comparable sales fell 2%.
Levi Strauss & Co
Jeans giant Levi Strauss & Co saw net sales increase in the first quarter, up 4% to US$1.10bn from $1.06bn in the year-ago period. In the three months ended 26 February, net income slipped to $60m, down 9% from $66m last year. The decline primarily reflected lower gross margins, the San Francisco-based company said. Gross margin narrowed to 51.2% from 53%. In Europe, net revenues were up 12%, while in the Americas sales dropped by 1% and Asia net revenues declined 2%.
"Despite the on-going challenges in the industry, I am pleased that we delivered 5% currency-neutral growth over a strong Q1 last year," said Chip Bergh, president and CEO. "We were able to deliver these solid results despite a declining US wholesale business, because of the breadth of our portfolio. Specifically, we grew in all three regions, with particularly outstanding results in Europe; double digit growth in our direct-to-consumer business; and double digit growth on women's and tops."