US Q1 in brief – L Brands, Target Corp, The TJX Companies
2021.05.20 Just style
The latest first-quarter filings from US apparel and footwear brands and retailers show some companies are beginning to recover from the market disruption caused by the Covid-19 pandemic. However, figures are mostly in comparison to the period when the market began to first feel the impact of the global coronavirus pandemic when stores began to close or reduce their opening hours.
Andrew Meslow, CEO of L Brands, said the company delivered record first-quarter earnings, driven by "continued strength and exceptional performance" at Bath & Body Works and Victoria's Secret. The group reported net sales of US$3.02bn for the first quarter ended 1 May, compared to $1.65bn a year earlier. First-quarter 2020 sales were negatively impacted by the closure of stores for about half the quarter due to the pandemic. Total Victoria's Secret sales amounted to $1.55bn, up from $893.6m in the prior-year period, while those at Bath & Body Works were $1.47bn, compared to $760.6m. Net income was $276.6m, compared to a loss of $296.9m last year. Adjusted net income amounted to $356.7m, compared to an adjusted net loss of $275.2m.
L Brands announced earlier this month it is to spin-off Victoria's Secret into an independent publicly traded company under new plans to separate the brand from Bath and Body Works. The company has today (20 May), announced the appointment of chief financial officers (CFO) for the standalone Bath and Body Works and Victoria's Secret businesses. Wendy Arlin, currently senior vice president of finance and controller for L Brands, will become Bath and Body Works CFO, and Tim Johnson, previously CFO and chief administrative officer for Big Lots, will become Victoria's Secret CFO. As previously announced, current L Brands CFO Stuart Burgdoerfer will retire at that time.
Department store retailer Target Corp said total revenue of US$24.2bn in the first quarter grew 23.4% compared with last year, driven by total sales growth of 23.3% and a 30.4% increase in other revenue. Comparable sales grew 22.9%, reflecting comparable store sales growth of 18% and comparable digital sales growth of 50%. Net earnings, meanwhile, totalled $2.1bn, compared to $284m last time, while gross margin rate widened to 30% from 25.1% in 2020. This year's gross margin rate reflected the benefit of favorable category mix and merchandising actions, primarily from low markdown rates, while last year's gross margin rate reflected elevated inventory costs and impairment charges.
The TJX Companies said for the first quarter ended 1 May net sales were US$10.1bn, an increase of 129% versus the prior-year period in which stores were closed for about 50% of the quarter due to the Covid-19 pandemic. Overall open-only comp store sales increased 16% versus last year, well above plan. Net income, meanwhile was $533.9m, compared to a net loss of $887.5m last time.
CEO Ernie Herrman: "As we start the second quarter, overall open-only comp store sales trends remain similar to the first quarter. While the environment remains uncertain, particularly internationally, we are convinced we are strongly positioned as we emerge from this health crisis."
Macy's CEO Jeff Gennette said the company outperformed sales expectations across all three of its brands, Macy's, Bloomingdale's and Bluemercury, in the first quarter with net sales amounting to US$4.71bn, compared to $3.02bn in the prior-year period. Comparable sales were up 62.5% on an owned basis and 63.9% on an owned plus licensed basis versus 2020, while digital sales grew 34% over 2020. Digital penetration was 37% of net sales, a 6-percentage point decline from last year when stores closed. Net income, meanwhile, amounted to $103m, compared to a net loss of $3.58bn a year prior. Gross margin for the quarter was 38.6%, up from 17.1% last time.
US retail giant Walmart said total revenue for the first quarter amounted to US$138.3bn, an increase of $3.7bn, or 2.7%. Revenue was negatively affected by about $4.2bn related to recent divestitures in Walmart International. Excluding currency, total revenue would have increased 2.1% to reach $137.4bn. Walmart US posted a 5% rise in net sales to $93.2bn, while US comp sales increased 6% in the quarter. Operating income increased 26.8%. Walmart US e-commerce sales grew 37% with strong results across all channels, contributing about 360 basis points to comp sales. Sales more than doubled over the last two years. Net sales at Walmart International, meanwhile, were $27.3bn, a decrease of $2.5bn, or 8.3%. Net sales were negatively affected by the divestitures in Walmart International, while changes in currency exchange rates positively affected net sales by about $0.9 billion. E-commerce sales increased 49%. Consolidated net income attributable to Walmart for the three months to 30 April amounted to $2.73bn, compared to $3.99bn a year prior. Consolidated gross profit rate increased 104 basis points, led by strength in Walmart US.
"We anticipate continued pent-up demand throughout 2021," said president and CEO Doug McMillon.
Dillard's CEO William Dillard, II said: "There are a lot of good things to say about this quarter. As vaccinations increased, stimulus money was released and warmer weather arrived, we saw sales increase over 2019 levels, with momentum continuing throughout the quarter. For the 13 weeks ended 1 May, net sales amounted to US$1.33bn, compared to $786.7m last year. Net sales include the operations of the company's construction business, CDI Contractors, LLC. Total retail sales, which exclude CDI, increased 73% to $1.3bn with juniors' and children's apparel, men's apparel and accessories, and ladies' accessories and lingerie among the stronger performing categories. Net income, eanwhile, amounted to $158.2m, compared to a net loss of $162m last time. Included in net income for the 2021 quarter is a pretax gain of $24.6m primarily related to the sale of three store properties. Consolidated gross margin, which includes CDI, improved to 41.7% from 12.5% for the prior year first quarter, while retail gross margin, which excludes CDI, widened to 42.7% from 12.8%.
For the first quarter ended 31 March, Iconix Brand Group posted total revenue of US$23.6m, a 15% decline, compared to $28m last year. The firm attributed a 41% decrease in revenue in its women's segment principally to a decrease in licensing revenue from its Mudd, Candies and Joe Boxer brands partially offset by an increase in the Danskin brand. Revenue from the men's segment decreased 17% mainly due to a fall in licensing revenue from the Buffalo brand. International segment revenue improved 2% mainly due to an increase in licensing revenue in Europe. GAAP net income attributable to Iconix for the period was $4.2m, compared to a net loss of $21.8m last time.
Wolverine World Wide CEO Blake Krueger said the company believes 2021 will be a breakthrough and its first-quarter performance was an excellent start. For the three months to 3 April, reported revenue was US$510.7m, up 16.3% versus the prior year. On a constant currency basis, revenue was up 14.3%, while owned e-commerce reported revenue grew 83.6%. Net earnings, meanwhile, amounted to $38.4m, compared to $12.8m last time, while reported gross margin expanded to 43.5% from 41.4%. Adjusted gross margin was 44.3%, compared to 41.4% last time.
For the full 2021 fiscal year, the company now expects revenue in the range of $2.24-$2.3bn, growth of 25-28% versus the prior year, up $50m from its outlook in February and exceeding 2019 revenue at the high end of the range. Wolverine World Wide remains focused on delivering its target of $500m in owned e-commerce revenue, more than doubling 2019 levels.
US apparel manufacturer HanesBrands reported net sales from continuing operations of US$1.51bn, an increase of 25% on last year. Total constant currency first-quarter net sales for the period to 3 April were up 22%. US innerwear sales rose 35% to $570m, while US activewear sales increased 26% to $364m. International revenue increased 18% over the prior year. On a constant currency basis sales grew 8%. Net loss for the period amounted to $263.26m, compared to a net loss of $7.87m last time. HanesBrands recorded a non-cash impairment charge of about $390m in the quarter to reflect an intangible asset impairment and net asset write down related to its European innerwear business. First-quarter GAAP income from continuing operations, meanwhile, was $128m, compared to $5m a year earlier. Adjusted income from continuing operations excluding after-tax charges totaled $136m, compared to $26m. First-quarter GAAP gross margin of 40% increased 520 basis points compared to the prior-year period. Adjusted gross margin of 40.2% increased 360 basis points.
Kontoor Brands CEO Scott Baxter said the company started 2021 with solid momentum as first-quarter results came in above expectations. For the three months to 3 April, revenue increased 29% to US$652m on a reported basis and 27% in constant currency over the same period in the prior year. US revenue was up 29% to $488m, while international revenue was $163 million, a 30% on a reported basis and 21% in constant currency. Improvement was driven by the China business that surged 109% in constant currency and 20% in constant currency. Despite ongoing headwinds from Covid-19, the Europe business, led by digital, increased 4% on a reported basis and was down 5% in constant currency. Wrangler brand global revenue amounted to $399m, a 31% rise on a reported basis and 30% in constant currency, while Lee brand global revenue increased to $250m, a 37% rise on a reported basis and 33% in constant currency. Net income, meanwhile, amounted to $64.46m, compared to a net loss of $2.71m last time. Gross margin increased 830 basis points to 46.1%.
US sportswear retailer Under Armour saw revenue rise 35% in the first quarter ended 31 March to US$1.3bn compared to the prior year. Wholesale revenue increased 35% to $800m, while direct-to-consumer revenue surged 54% to $437m, driven by 69% growth in e-commerce. North America revenue jumped 32% to $806m, while international revenue increased 58% to $452m. Within the international business, revenue increased 41% in EMEA and by 120% in Asia-Pacific, but decreased 9% in Latin America. Apparel revenue, meanwhile, was up 35% to $810m, while footwear revenue increased 47% to $309m. Accessories revenue was up 73% to $117m. Net income, meanwhile, amounted to $77.8m, compared with a net loss of $589.7m a year earlier. Adjusted net income for the quarter was $75m. Gross margin increased 370 basis points to 50% compared to the prior year, driven primarily by benefits from pricing, supply chain initiatives, and channel mix.
Rocky Brands CEO Jason Brooks hailed an "excellent" start to the year as net sales for the first quarter ended 31 March increased 57.3% to US$87.7m. First-quarter 2021 net sales include $6.5m in net sales from the performance and lifestyle footwear business acquired from Honeywell International, Inc. Net income for the period amounted to $4.5m, compared to $1.2m last time. Adjusted net income was $8.7m, compared to $2m in the first quarter of 2020. Gross margin expanded to 40.1% from 34.7%.
Footwear maker Weyco has reported net earnings of US$1.3m for the first quarter ended 31 March, compared to $1.2m in the prior-year period. Net sales fell to $46.9m from $63.6m last time. Net sales in the North American retail segment were $5.6m compared to $4.8m in last year's first quarter. Same-store sales were up 32% for the quarter due to a 36% increase in e-commerce sales, mainly BOGS, offset by a 5% decline in brick-and-mortar same-store sales.
Carter's CEO Michael Casey said the company's first-quarter sales and earnings meaningfully exceeded expectations, with growth in each of its retail, wholesale, and international business segments. Net sales increased US$132.9m, or 20.3%, to $787.4m for the quarter ended 3 April, with US retail, US wholesale, and international segments growing 27%, 12%, and 19%, respectively. US e-commerce net sales were up 38%. Consolidated net sales in fiscal March increased 59% compared to the prior-year period. Net income increased $164.9m to $86.2m, compared to a net loss of $78.7m in the first quarter of fiscal 2020. Adjusted net income amounted to $87m, compared to a net loss of $34.8m last time.
For fiscal 2021, the company projects net sales will increase about 10%, with adjusted diluted earnings per share up by about 40% compared to $4.16 in fiscal 2020.
Columbia Sportswear's net sales increased 10% to US$625.6m for the quarter ended 31 March, compared to $568.2m in the prior-year period. Business momentum was led by direct-to-consumer 0DTC) e-commerce net sales growth of 35%, as well as better than planned sequential improvement in DTC brick and mortar trends. Net income, meanwhile, amounted to $55.9m compared to $0.2m last time, while gross margin expanded 360 basis points to 51.4% from 47.8% for the comparable period in 2020. Gross margin expansion was primarily driven by decreased reserve provisions related to less excess inventory, lower DTC promotional levels, and favourable channel and region sales mix.
For the full year, Columbia Sportswear expects net sales of $3.04-$3.08bn, representing net sales growth of 21.5-23% compared to 2020. Net income is expected to be $271-$288m, resulting in diluted earnings per share of $4.05 to $4.30.
Steve Madden saw first-quarter revenue increase by 0.5% to US$361m from $359.2m in the same period of 2020. Revenue for the wholesale business declined 3.7% to $291.4m, while retail revenue was $67.5m, a 27.5% increase compared to last year, driven by strong performance in the e-commerce business. Net income attributable to Steven Madden, Ltd was $21.2m, compared to a net loss of $17.5m last time. Adjusted net income was $26.9m, compared to $13m. Gross margin increased 130 basis points to 38.5% from 37.2% a year prior.
CEO Andrew Rees said demand for the Crocs brand is stronger than ever with expected 2021 revenue growth of 40-50%. "In the first quarter we achieved record revenues and profitability, with growth in all regions and all channels. We have raised full year guidance as we continue to see consumer demand for our product accelerate globally," Rees noted. The footwear firm booked record first-quarter revenues for the three months ended 31 March of US$460.1m. This was up 63.6% on last year, or 60.5% on a constant currency basis, with growth in all regions and channels. Digital sales grew 75.3% to represent 32.3% of revenue versus 30.1% last year. Direct-to-consumer grew 93.3% and wholesale revenues by 50.1%. Geographically, Americas revenues of $276.4m surged 87.5% on a constant currency basis, while those for Asia Pacific were up 20.1% to $82.6m. EMEA revenues of $101.1m increased 41%. Net income, meanwhile, amounted to $98.4m, compared to $11.09m a year earlier. Gross margin of 55% increased 730 basis points from 47.7% in the same period last year. Adjusted gross margin of 55.2% rose 720 basis points.
Footwear retailer Skechers USA has reported sales of US$1.43bn for the first quarter ended 31 March, an increase of 15% and a quarterly record. The rise was a result of a 20.2% increase in international sales and an 8.5% hike in domestic sales. Increases in international sales were driven by wholesale, while domestic sales were driven by direct-to-consumer, including e-commerce growth of 143%, partially offset by a slight decline in wholesale. On a constant currency basis, the company's total sales increased 11.7%. Net earnings were $98.6m, compared to $49.1m last year. Gross margin increased 350 basis points to 47.6% as a result of increased margins in both the international wholesale and direct-to-consumer segments. The strong margin performance was driven by an increase in selling price across all channels and a favourable mix of e-commerce sales.
Levi Strauss & Co
Jeans giant Levi Strauss & Co has raised its guidance for the first six months after making a strong start to the year and beating internal expectations for the first quarter. For the three months ended 28 February, the denim specialist reported a 13% decline in net revenues to US$1.31bn on a reported and 16% on a constant-currency basis from $1.51bn last time. Geographically, net revenues in the Americas declined 14% on a reported basis to $641m, while those in Europe were down 16% to $429m. In Asia, net revenues fell 5% on a reported basis to $235m. Net income, meanwhile, dropped 6.5% to $143m from $153m in the same quarter of the prior year, due to higher interest expense and the adverse revenue impact of Covid-19. Adjusted net income was $140m, as compared to $162m last time. Reported gross margin increased 250 basis points to 58.2%, a record high for the company.
Looking ahead, the company has raised its fiscal first-half 2021 reported net revenues outlook to 24-25% growth compared to the first half of 2020 and raised its first-half adjusted EPS estimate to $0.41-$0.42.