Retailer Results Send Mixed Signals on Consumer Spending
November 19 2019 - 12:21PM
Dow Jones News
By Allison Prang and Patrick Thomas
Retailers gave a mixed read on consumer spending heading into
the pivotal holiday season, with department store chain Kohl's
Corp. and Home Depot Inc. reporting weak demand, but discounter TJX
Cos. continuing to log strong sales.
Kohl's said comparable sales -- typically those from stores open
at least a year -- increased 0.4% from a year ago in the quarter
ended Nov. 2, after several quarters of declines. The increase was
less than Wall Street expected. Executives said the chain was
entering the holiday period with momentum, but lowered their profit
forecasts for the rest of the year.
Kohl's Chief Executive Michelle Gass said August got off to a
strong start with a successful back-to-school season, but business
weakened in September with unseasonably warm weather. That prompted
competitors to ramp up discounts. Kohl's reacted by stepping up its
own promotions, which hurt profit margins, but helped it regain
sales momentum in October.
"We are going to make the short-term investment in pricing to
make sure we capture these customers," Ms. Gass said.
TJX, parent of the TJ Maxx and HomeGoods chains, reported a 4%
jump in comparable sales in the quarter ended Nov. 2 and raised its
profit forecasts for the rest of the year. Executives cited strong
traffic to its stores and an abundance of merchandise that the
discount chain can buy to fill its stores.
"We are seeing fantastic, widespread availability of quality,
branded merchandise and are in a great position to capitalize on
these opportunities," CEO Ernie Herrman said.
Meanwhile, Home Depot lowered its sales forecast for the year
Tuesday after third-quarter revenue fell short of Wall Street
expectations. Same-store sales were up 3.6% for the period ended
Nov. 3, below the 4.7% analysts were expecting.
Shares of Home Depot, which have rallied about 40% this year
through Monday, were off about 5% in morning trading. Shares of
Kohl's fell nearly 19% in morning trading, while TJX gained about
2%.
The results follow a strong report from Walmart Inc. Last week,
the country's biggest retailer reported rising comparable sales and
said traffic to its U.S. stores were strong. Later this week,
investors will hear from Target Corp. and Macy's Inc.
Consumer spending has been relatively strong this year, helped
by the strong U.S. economy and low unemployment. Retail sales rose
slightly in October, the Commerce Department said Friday, after a
drop in September. Excluding vehicles and gasoline, categories that
are often volatile, spending rose just 0.1% from a month earlier,
as Americans spent less on clothing and eating out.
Ms. Gass said Kohl's was well positioned for the holiday season.
This will be the first holiday that the chain will accept returns
of products bought on Amazon.com Inc. in all of its more than 1,100
stores. Ms. Gass said the program is bringing in new and younger
customers to Kohl's. The retailer has also rolled out new lines by
designer Jason Wu, Nine West and Elizabeth and James. And it is
expanding its athletic offerings from companies such as Adidas AG
and Nike Inc.
Neil Saunders, managing director of research firm GlobalData
Retail, said it was notable that TJX delivered strong sales growth
in the face of heavier discounting from full-priced retailers.
"Theoretically, this gives the consumer greater ability to shop
around and to snag a bargain," Mr. Saunders wrote in a note to
clients. "In practice, however, much of the discounting is
occurring at the weaker retailers which consumers are not inspired
to visit."
Home Depot blamed its disappointing quarterly sales numbers on
investments taking longer than anticipated to pay off. Home Depot
has been trying to more closely integrate its online business with
its network of about 2,290 bricks-and-mortar stores over the past
few years.
"Our sales performance was below our expectations," Chief
Executive Craig Menear said. "Our rollout is largely on track and
we are realizing benefits, it's just taking a little longer than
our original assumptions."
Third-quarter sales at the Atlanta company rose 3.5% from a year
ago to $27.22 billion. Overall, the company posted net income of
$2.77 billion, compared with $2.87 billion a year ago.
--Patrick Thomas contributed to this article.
Write to Allison Prang at allison.prang@wsj.com and Patrick
Thomas at Patrick.Thomas@wsj.com
(END) Dow Jones Newswires
November 19, 2019 12:06 ET (17:06 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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