Retail Signals Strength As the Holidays Loom -- WSJ
November 16 2016 - 3:02AM
Dow Jones News
By Paul Ziobro
American consumers shrugged off pre-election jitters this fall
and spent more on home-improvement projects, sporting goods and
off-price clothing, a promising sign ahead of the Black Friday
retail frenzy.
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.
TJX, which owns T.J. Maxx and other discount chains, said it is
already stepping up marketing. "Our TV commercials have just
launched and will be running every week throughout the holiday
season," said Chief Executive Ernie Herrman.
Home Depot Inc., Dick's Sporting Goods Inc. and TJX on Tuesday
all reported strong sales growth in the quarter through October,
with gains of at least 5% at existing stores from the year before.
The results came on the same day the Commerce Department reported
the best two-month performance of national retail sales in at least
two years.
The data suggest a healthy profile for the U.S. consumer ahead
of the all-important holiday shopping season. The National Retail
Federation estimates sales over the period will rise 3.6% from a
year ago, slightly higher than the 3.4% growth last year.
The earnings reports Tuesday from three large chains show the
continuation of outside factors have buoyed their results. However,
shares of all three companies fell in 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 Macy's Inc., Kohl's Corp. and J.C. Penney Co.
posted sales declines in their recent quarters and some big-box
retailers such as Target are struggling to attract shoppers.
Online shopping also is proving to be a major competition,
siphoning off shopping trips to physical stores.
Amid concerns that the final weeks of the presidential election
had weighed on sales, finance chief Carol Tome said "that didn't
happen at the Home Depot." One reason is that much of Home Depot's
business are purchases that shoppers can't forego. "If your
refrigerator stops working, you're going to replace it no matter
who is elected to office," Ms. Tome said.
For the quarter, Home Depot's 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. k
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 its
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.
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, though he raised concerns that warmer weather could depress
sales of high-margin cold-weather gear.
TJX, which also owns Marshalls and HomeGoods, 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. Herman said.
Mr. Stack played down concerns that the election had kept
shoppers on the sidelines. "We don't really think it had any
impact," 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 16, 2016 02:47 ET (07:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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