JC Penney (NYSE:JCP)
Historical Stock Chart
6 Months : From Apr 2018 to Oct 2018
By Sarah Nassauer and Suzanne Kapner
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 18, 2018).
A strong U.S. economy and recent store improvements are helping Walmart Inc., Macy's Inc. and other big retail chains replace business lost to online rivals.
Buoyed by low unemployment and rising wages, Americans are stepping up purchases of everything from apparel to groceries to dishwashers. Meanwhile, many retailers, stung by competition from Amazon.com Inc., have closed hundreds of weaker stores, leaving them with leaner inventories and better locations.
But not all chains are benefiting -- J.C. Penney Co. and Nordstrom Inc. reported weak quarterly sales on Thursday -- and executives at several chains said cold April weather weighed on the latest results.
Some that reported results this week also said they hadn't yet seen much of a boost from the U.S. tax overhaul that should leave households with more spending money this year.
Walmart, the world's biggest retailer, said Thursday that sales in its latest quarter rose both online and in stores, driven by higher grocery sales and more competitive prices and services online. The results eased some fears earlier this year that growth on the e-commerce side of its business was slowing.
The economy is strong overall, though some shoppers are feeling the pinch from rising gas prices, said Walmart Chief Financial Officer Brett Biggs in an interview. "What we are seeing in the stores feels like what it's felt like over the last 24 to 48 months," he said.
The Commerce Department said Tuesday that April retail sales -- a measure of spending at stores, shopping websites and restaurants -- rose a seasonally adjusted 0.3% from the prior month. The April increase followed stronger-than-expected growth for March, a relief for analysts who had worried about a late-winter slowdown in consumer spending.
Walmart reported that U.S. same-store sales rose 2.1% in the quarter ended April 30. Its e-commerce sales rose 33% from a year earlier, topping 23% growth for the preceding quarter. E-commerce still accounts for a sliver of the company's business, but it is the fastest growing part.
Grocery sales were strong, although other product sales were somewhat sluggish due to "unseasonably cool weather in April," Walmart said. That has since reversed, said executives.
Penney and Home Depot Inc., which reported earlier this week, also cited cool weather for sluggish April sales. Home Depot's same-store sales still rose 4.2%, driven by home-improvement projects.
Shares of Penney fell 12% on Thursday, while Walmart shares slipped 1.9% and Macy's gained 2%.
On Wednesday, Macy's said sales, excluding newly opened or closed locations, rose 3.9% in its latest quarter, a sign that the department-store giant is pulling out of a prolonged slump. "The customer is feeling confident, and is out there ready to spend," Macy's CEO Jeff Gennette said Wednesday.
He added that tax cuts are benefiting both consumers and companies. "We've been able to go faster with our initiatives based on the corporate tax cut," he said.
Penney suffered from continuing weakness in its women's and children's apparel offerings and supply-chain problems that forced it to liquidate some holiday goods. But it said it continued to pick up market share for appliances as Sears Holdings Corp. closed stores.
Nordstrom's shares fell more than 6% in after-hours trading after the retailer reported that same-store sales rose just 0.6% in the three months to May 5. Its total sales rose 5.8%, boosted by a promotional event that last year didn't happen until the company's second quarter. Nordstrom's gross profit was hit by costs related to its first Manhattan store, which opened in April.
Walmart is the largest seller of groceries in the U.S. and earns around 56% of its $318.5 billion in annual U.S. sales from food. But with Amazon moving rapidly into the category, Walmart is stepping up its efforts to sell groceries online.
On Thursday the company said it will offer home delivery of groceries from 800 stores by year-end, adding to the roughly 2,100 stores where shoppers can place orders online and pick up their purchases in store parking lots.
Investment to expand online at home and abroad, as well as to improve stores, continues to cut into the retailer's bottom line. For its first quarter, Walmart posted a profit of $2.13 billion, down from $3.04 billion a year earlier.
This month Walmart agreed to take control of India's largest e-commerce company, Flipkart Group, for $16 billion, betting that growth in the South Asian market will eventually make up for short-term losses in taking on the unprofitable startup.
Walmart also recently agreed to sell control of its U.K. chain Asda to J Sainsbury PLC, and, according to people familiar with the matter, it is in talks to sell a majority stake in its Brazilian operations.
Walmart reiterated Thursday that the Flipkart investment is expected to reduce full-year per-share earnings by 25 cents to 30 cents. The hit to earnings is expected to grow to 60 cents a share in the following fiscal year to keep Flipkart sales growing. The company previously said per-share earnings for the current fiscal year would be between $4.75 and $5.
Write to Sarah Nassauer at email@example.com and Suzanne Kapner at Suzanne.Kapner@wsj.com
(END) Dow Jones Newswires
May 18, 2018 02:47 ET (06:47 GMT)
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