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US Q3 in brief – JCPenney, Dillard’s, Walmart


In the latest third-quarter filings from US apparel and footwear brands and retailers, JCPenney has narrowed its net loss, retail giant Walmart booked a rise in both sales and earnings, while Kontoor Brands reported results in line with company expectations. Elsewhere, Under Armour has announced a mixed quarter as sales dropped but profit increased.

JCPenney

JCPenney CEO Jill Soltau said the company has made "significant progress" on its efforts to return to sustainable, profitable growth in the third quarter. The business narrowed its net loss to US$93m in the period ended 2 November from $151m last year. Adjusted net loss was $97m, compared to an adjusted net loss of $164m in the prior-year period. Total net sales, meanwhile, decreased 10.1% to $2.38bn, compared to $2.65bn last year, while comparable-store sales declined 9.3 % for the quarter. Adjusted comparable store sales, which exclude the impact of the company's exit from major appliance and in-store furniture categories, decreased 6.6%

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Dillard's

Dillard's CEO William Dillard, II, said while the company is not satisfied with the third quarter, it was a "substantial improvement" over the second quarter. For the 13 weeks to 2 November, Dillard's reported net income of US$5.5m, compared to net income of $7.4m for the prior-year third quarter. Included in net income for the current third-quarter is a pretax loss of $0.3m primarily related to the sale of a store property. Net sales, meanwhile, fell to $1.39bn from $1.42bn last year, while comparable-store sales were flat against a 3% increase in the prior-year third quarter. Retail gross margin improved 13 basis points of sales in the period, compared to last year.

Walmart

US retail giant Walmart has booked a positive third-quarter as sales and earnings increased. Total revenue in the period was up 2.5% to US$128bn, with international sales increasing 1.3% to $29.2bn. US sales, meanwhile, were up 3.2% to $83.2bn. Operating income declined 5.4%, or 4.1% in constant currency, as costs continued to outstrip overall revenue growth. However, consolidated net income soared 83% to $3.32bn as a result of a number of losses last year driven by divestitures in the Brazilian operation and a loss on an investment in JD.com.

Iconix Brand Group

Iconix Brand Group has moved to a loss in the third quarter and a booked lower sales as a result of the transition from Danskin and Mossimo direct-to-retail licenses in its women's segment. The Sears bankruptcy also had an impact. Sales dropped 23% to US$35.5m, while GAAP net income reflected a loss of $35.7m from income of $20.2m a year earlier. Adjusted EBITDA margin in the quarter was 59% from 35% last year thanks to a decrease in expenses, which outpaced a decrease in revenues.

Kontoor Brands

Kontoor Brands, the owner of iconic denim brands Wrangler and Lee, has reported third-quarter results that were in line with company expectations. For the period ended 28 September, revenue decreased 9% year-over-year to US$638m on a reported basis and was down 8% in constant currency. Compared to third quarter 2018 adjusted revenue, revenue declined 6% in the quarter. Kontoor said revenue declines in the period were driven by strategic quality-of-sales initiatives, which contributed 3 points to the decline; impacts of a major US retailer bankruptcy in the fourth quarter of 2018, which represented about 2 points of the decline; and foreign currency headwinds that impacted revenues by about 1 point. Wrangler brand global revenue decreased 7% to $367m on a reported basis and in constant currency, while as expected, Lee brand global revenues sequentially moderated in the third quarter, decreasing 8% to $232m on a reported basis, down 6% in constant currency. Net income, meanwhile, tumbled to $14.5m from $71m in the prior-year period. Gross margin increased 30 basis points to 40.1% on a reported basis. On an adjusted basis, gross margin was up 20 basis points to 40.9%. Increases were primarily due to the impacts of restructuring and quality-of-sales initiatives, as well as favourable channel mix, which more than offset the negative impact of strategic actions taken in India and the pressure from foreign currency.

CEO Scott Baxter said: "We're beginning to realise the benefits of the previously announced restructuring and cost-savings initiatives, while we continue to stabilise and globalise our organisation. And, we're improving the quality of our sales, including exiting unprofitable points of distribution, changing business models and rationalising underperforming SKUs. These actions create the building blocks for healthy, sustainable future growth."

Wolverine World Wide

Wolverine Worldwide has delivered its highest quarterly revenue increase of the year driven by constant currency growth of over 11% from Merrell, Sperry and Saucony, according to CEO Blake Krueger. Reported revenue of US$574.3m increased by 2.8% from $558.6m in the prior year. Addjusting for currency, revenue was up by 3.6%. Net earnings, however, fell to $48.6m in the period from $58.9m last year. Reported gross margin of 42.4%, was in line with expectations, and increased 80 basis points compared to 41.6% in the prior year.

Weyco Group

Footwear maker Weyco has booked a rise in both earnings and revenue for the third quarter, with net income attributable to the company up 5% to US$6.6m from $6.3m in the prior-year period. Net sales for the quarter were $82.5m, an increase of 5% compared to third-quarter 2018 net sales of $78.4m.

In August 2019, the US government announced it would impose an additional 15% tariff on footwear sourced from China. The tariff on leather footwear, which primarily impacts Weyco's Florsheim, Stacy Adams, and Nunn Bush brands, took effect on 1 September. The tariff on rubber and other non-leather footwear, which primarily impacts the BOGS brand, is expected to take effect on 15 December. Weyco said it has negotiated wholesale price increases with many of its customers and price reductions from many of its Chinese suppliers in an effort to mitigate the overall impact of the tariff cost increases. However, it warned while the tariff had a minimal impact on the company's third-quarter 2019 financial results, Weyco added the ultimate future impact of the tariff on its gross margins, results of operations, and overall financial statements is "unknown at this time."

Under Armour

US sportswear brand Under Armour has announced a mixed third-quarter as revenue dropped but earnings increased. For the three months to 30 September, net income totalled US$102.3m, compared to $75.3m. Gross margin increased 220 basis points to 48.3%, compared to the prior year driven by channel mix, supply chain initiatives and restructuring charges in the prior period. Net revenues, however, fell 1% to $1.43bn from $1.44bn in the prior-year period. On a currency-neutral basis, revenues were flat. Wholesale revenue decreased 2% to $892m, while direct-to-consumer revenue also fell by 1% to $463m, representing 32% of total revenue. North America revenue was down by 4% to $1bn and the international business increased 5% to $368m, representing 26% of total revenue. Within the international business, revenue was up 9% in EMEA, up 4% in Asia-Pacific, and down 4% in Latin America. Meanwhile, apparel revenue was up 1% to $986m, while footwear revenue decreased by 12% to $251m. On a year-to-date basis, apparel and footwear revenue are relatively flat compared to 2018.

Looking ahead, Under Armour has updated it fiscal 2019 outlook and now expects revenue to be up about 2% versus the previously expected range of 3-4%, due to lower than planned excess inventory to service the off-price channel; ongoing traffic and conversion challenges in direct-to-consumer; and negative impacts from changes in foreign currency. Earnings per share is now expected to reach the high end of the previously given range of approximately $0.33 to $0.34.

HanesBrands

Underwear and activewear maker HanesBrands has announced inline third-quarter 2019 results for the three months to 28 September. Net sales increased by 1% to US$1.87bn in the period as reported and by 2% in constant currency. International sales growth of 7% as reported and 11% in constant currency exceeded expectations with growth in both activewear and innerwear. Global sales of Champion activewear and innerwear surged by 25% as reported and by 26% in constant currency, both excluding the US mass channel. Net income, meanwhile, rose 9.5% to $187.8m, compared to $171.4m in the year-ago period.

Columbia Sportswear

Columbia Sportswear reported record third-quarter results and updated its full-year outlook on the back of broad-based growth across its geographic segments, channels, and product categories. Net sales for the period ended 30 September increased 14% (15% constant-currency) to a record US$906.8m from $795.8m for the same period in 2018. Net income, meanwhile, surged 19% to $119.3m from $100.2m for the comparable period in 2018. Gross margin expanded 110 basis points to 49.3% from 48.2% last year.

Looking ahead, Columbia Sportswear now expects net sales of$3.01bn to $3.04bn (prior$3bn-$3.04bn) for the 2019 financial year, representing net sales growth of 7.5-8.5% (prior 7-8.5%).

Crocs

Crocs has hailed what CEO Andrew Rees called an "excellent" quarter highlighted by 20% top-line growth and record third-quarter revenues. For the three months ended 30 September, revenues totalled US$312.8m, growing 19.8% over the third quarter of 2018, or 21% on a constant currency basis. Crocs said currencies negatively impacted revenues by about $3m, while store closures reduced revenues by about $4m. Wholesale revenues grew 25.4%, e-commerce revenues grew 28.2%, and retail comparable store sales grew 12.5%. Net income attributable to common stockholders was $35.7m, up from $6.5m in the third quarter of 2018, while gross margin was 52.4%, compared to 53.3% in last year's third quarter.

Steve Madden

Edward Rosenfeld, CEO of US footwear and accessories specialist Steve Madden, said the company is pleased with its third-quarter results, which included adjusted earnings that "significantly" exceeded its expectations driven by strong performance in it Steve Madden and Blondo brands. Net income attributable to Steven Madden, Ltd for the period ended 30 September, totalled US$52.5m, compared to $55.6m in the prior year's third quarter. Adjusted net income was $56m, compared to $55.9m last year. Gross margin was 38.4% compared to 38.2% in the same period last year, an increase of 20 basis points. Net sales, meanwhile, increased by 8.5% to $497.3m from $458.5m in the same period of 2018. Net sales for the wholesale business were also up by 8.5% to reach $421.6m, with strong growth in the wholesale footwear and the wholesale accessories/apparel segments. Retail net sales in the third quarter rose 8.3% to $75.7m, compared to $69.9m in the prior-year period, while same-store sales increased 5.1% in the quarter driven by strong performance in the company's e-commerce business.

Carter's

A US$23.7m non-cash charge related to the write-down of the Skip Hop tradename took a toll on Carter's profit in the third quarter. Net income for the period ended 28 September, decreased $11.5m, or 16%, to $60.3m, compared to $71.8m in the third quarter of fiscal 2018. Adjusted net income increased $8.6m, or 11.5%, to $83.9m, compared to $75.3m in 2018. Net sales, meanwhile, increased $19.4m, or 2.1%, to $943.3m, primarily driven by growth in the company's US wholesale and US retail segments. Changes in foreign currency exchange rates in the third quarter of fiscal 2019 compared to the third quarter of fiscal 2018 adversely affected consolidated net sales in the third quarter of fiscal 2019 by $1.3m, or 0.1%. On a constant currency basis, consolidated net sales increased by 2.2% in the third quarter of fiscal 2019.

Rocky Brands

Rocky Brands has booked a rise in both earnings and revenue for the third quarter as CEO Jason Brooks says the firm continues to have success capitalising on its key growth opportunities. For the period ended 30 September, net sales increased 2% to US$67.2m from $65.9m in the third quarter of 2018. Net income in the period totalled $5.6m, up from $50m last year, while gross margin expanded to 37.2% from 34% in the prior year period. The 320 basis point increase was driven by a higher percentage of retail sales, which carry higher gross margins than wholesale and military sales combined with higher retail, wholesale and military margins. Third-quarter 2019 gross margins also benefitted from a hurricane-related expense reimbursement, which contributed about 100 basis points to the year-over-year improvement. Excluding the hurricane-related expense reimbursement, gross margin in the third quarter of 2019 was 36.2%.

Skechers USA

Casual footwear brand Skechers USA reached record third-quarter sales of US$1.35bn, an increase of 15.1%, or 17.2% on a constant currency basis, on the same period last year. International sales jumped 21.9%, or 25.7% on a constant currency basis – representing a record high 58.8% of sales – while comparable same-store sales increased 7.7%, including increases of 6.8% domestically and 9.9% internationally. Net earnings were also up on last year, rising 13.7% to $103.1m from $90.7m. Gross margins widened to 48.2% from 47.9% as a result of improved retail pricing and product mix in the international businesses, partially offset by an increase in the average cost per unit in the domestic business. CEO Robert Greenberg said Skechers is " firing on all cylinders."

Levi Strauss & Co

Levi Strauss CEO Chip Bergh said the jeans giant delivered "strong" third-quarter results and remains on track to achieve its full-year expectations. For the quarter ended 25 August, net revenues grew 4% on a reported basis to US$1.45bn from $1.39bn the year before. On a constant-currency basis, net revenues were up by 5%. In Europe, net revenues grew 14% on a reported basis and 18% on a constant-currency basis, while in the Americas, net revenues declined 3% on both a reported and on a constant-currency basis due to a decline in the wholesale business, offset in part by growth in the direct-to-consumer business. In Asia, meanwhile, net revenues increased 9% on a reported basis and 12% on a constant-currency basis. However, third-quarter net income attributable to the company fell by 4% to $124.5m from $130.1m last year, despite higher operating income, due to tax benefits in the prior year. Adjusted net income was $128m, compared to $134m in the prior-year period. Gross margin, meanwhile, narrowed to 53% from 53.2% a year earlier, as the benefits of direct-to-consumer and international growth, as well as price increases the company initiated, were more than offset by unfavourable currency effects of 60 basis points and investment in product.

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