Shoppers Ramp Up Spending Ahead of Key Holiday Shopping Season -- Update
November 15 2016 - 2:31PM
Dow Jones News
By Paul Ziobro
American shoppers shrugged off pre-elections jitters and spent
more on home improvement projects, sporting goods and off-price
clothing, a promising sign ahead of the key holiday shopping
season.
Home Depot Inc., Dicks Sporting Goods Inc. and TJX Cos. on
Tuesday all logged strong sales growth in the quarter through
October, with gains of at least 5% at existing stores from the year
before. The results came as the Commerce Department said total
retail sales rose 0.8% in October from a month earlier. With a
revision in the September data, national retail sales clocked their
best two-month performance in at least two years.
The data suggests a healthy profile for the U.S. retail industry
just 10 days before Black Friday, the day after Thanksgiving that
marks the unofficial kickoff for the holiday shopping season.
Retailers have delayed their holiday marketing push due to the
long, bitter presidential election that ended a week ago with a win
by President-elect Donald Trump.
Now that the election is over and airwaves are freed up to
advertise more, retailers are in a race to log as many sales as
possible before Christmas, a stretch that can make or break a
retailer's financials for the year. The National Retail Federation
estimates sales over the period will rise 3.6% versus a year
ago.
TJX, which owns T.J. Maxx and other discount chains, said it is
stepping up marketing ahead of the holiday season. "Our TV
commercials have just launched and will be running every week
throughout the holiday season," Chief Executive Ernie Herrman said.
Meanwhile Home Depot and Dicks both said the election hadn't hurt
sales.
Largely, the earnings reports Tuesday from three large chains
show the continuation of outside trends that have buoyed results.
However, shares of all three companies fell in early Tuesday
trading, after rallying in the wake of the election. Later this
week investors will get another measure of spending when Wal-Mart
Stores Inc. and Target Corp. report their latest results.
While some retailers thrive with tailwinds like a rising housing
market or a competitor's bankruptcy, pockets of weakness remain.
Department stores like Macy's Inc., Kohl's Corp. and J.C. Penney
Co. posted sales declines in their recent quarters and some big-box
retailers like Target are struggling to attract shoppers. Online
shopping is also posing a major competition, siphoning off shopping
trips to physical stores.
Home Depot's third-quarter sales rose 5.5% at existing stores,
including 5.9% in the U.S. The rise in housing prices has made
homeowners more willing to spend on projects like bathroom remodels
and roof replacements. Earnings rose 14% to nearly $2 billion,
helped by a rising value of each transaction. The number of
transactions totaling more than $900 rose 11.3% in the quarter,
showing shoppers' willingness to spend on big projects.
Amid concerns that the election season dampened sales, Home
Depot finance chief Carol Tomé said in an interview "that didn't
happen at the Home Depot." One reason is that a large chunk of Home
Depot's business is purchases that shoppers can't forego. "If your
refrigerator stops working, you're going to replace it no matter
who is elected to office," she said.
The company is also winning over more professional customers
with enhanced credit offers and improved delivery services. It
raised its earnings outlook slightly for the year and still expects
sales to rise 6.3%. It doesn't see a let up in the trends that have
been at its back.
TJX, which also owns Marshalls and HomeGoods, relayed a
similarly optimistic message saying more shoppers came to its
stores to hunt through its off-price goods driving up sales.
"Our traffic, sales and merchandise margin increases tell us our
strategies are working," said Scott Goldberg, TJX's chief financial
officer. The margin increase, however, was offset by rising wages.
The retailer, which opened 110 new stores in the period, reported a
6.3% drop in net income to $549.8 million as financial charges on
debt and pensions eroded its 6.9% rise in total sales.
TJX said tighter inventory in the industry hadn't hurt its
ability to scoop up excess merchandise to sell at its discount
chains. "The market is loaded with goods," CEO Mr. Herrman
said.
Meanwhile, sports retailer Dick's said sales rose 5.2% at
existing stores, as it picked up market share in the wake of the
bankruptcy of rivals, including Sports Authority and Golfsmith.
"Looking ahead onto the fourth quarter, we are confident our
assortment and marketing will help us to continue to capture
displaced market share this holiday," Chief Executive Edward Stack
said.
But he raised concerns that warmer weather could hurt sales of
high-margin cold-weather gear and played down concerns that the
election curtailed spending. "We don't really think it had any
impact," he said.
Meanwhile, Dick's Chief Operating Officer Andre J. Hawaux
welcomed a potential overhaul of the tax code. "Everybody would
love a lower corporate tax rate. So we're all in favor of that," he
said.
Suzanne Kapner and Sara Germano contributed to this article.
Write to Paul Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
November 15, 2016 14:16 ET (19:16 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
J C Penney (NYSE:JCP)
Historical Stock Chart
From Aug 2024 to Sep 2024
J C Penney (NYSE:JCP)
Historical Stock Chart
From Sep 2023 to Sep 2024