By Suzanne Kapner and Allison Prang
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 (November 20, 2019).
Sluggish sales at Home Depot Inc. and Kohl's Corp. show the
challenges retailers face ahead of the holiday season, while growth
at off-price retailer TJX Cos. showed that shoppers are still
snapping up bargains.
Despite a strong U.S. economy, traditional retail chains have
battled for customers as spending moves online and people do more
of their browsing on their smartphones and less in the aisles of
department stores.
Tuesday's mixed results follow a strong quarterly performance by
Walmart Inc., the country's biggest retailer. Last week, the
company said traffic to its U.S. stores was increasing and consumer
spending was healthy. On Thursday, investors are set to hear from
Target Corp., which like Walmart, has been taking market share from
weaker chains.
"The winners keep winning and the losers keep losing," said
Jefferies Group analyst Randal Konik.
Consumer spending has been helped by low unemployment, rising
wages and low gasoline prices. Retail sales rose slightly last
month, the Commerce Department said Friday, after a drop in
September. Excluding vehicles and gasoline, categories that are
often volatile, spending in October rose just 0.1% from a month
earlier, as Americans spent less on clothing and eating out.
Executives and analysts said they weren't concerned about a big
consumer slowdown. Charles Grom, with Gordon Haskett Research
Advisors, noted that despite Home Depot's soft sales in the latest
quarter, the chain experienced an uptick in foot traffic and an
acceleration in big-ticket purchases. "Those are things that would
lead you to believe that we are not heading into a consumer
pullback," he said.
Home Depot blamed its disappointing quarterly sales numbers on
investments taking longer than anticipated to pay off. The
home-improvement chain has been trying to more closely integrate
its online business with its network of about 2,290
brick-and-mortar stores over the last few years.
Kohl's is one of several department-store chains struggling to
attract shoppers. J.C. Penney Co. reported a sharp drop in
same-store sales for its latest quarter, while the owner of Sears
is closing dozens of locations. Macy's Inc. will report its latest
results on Thursday.
Kohl's said comparable sales -- typically those from stores open
at least a year -- increased 0.4% from a year earlier in the
quarter ended Nov. 2, after several quarters of declines. The
increase was less than Wall Street expected, and the chain lowered
its profit forecast 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 when unseasonably warm weather hurt demand
for fall goods. 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're going to make the short-term investment in pricing and
promotion as we need to, to make sure that we can capture these
customers and importantly, get them" enrolled in our loyalty
program, Ms. Gass said.
TJX, parent of the TJ Maxx and HomeGoods chains, reported a 4%
jump in comparable sales for the quarter ended Nov. 2 and raised
its profit forecast for the year.
Executives cited strong traffic to its stores and an abundance
of merchandise that the discount chain can buy to fill its
shelves.
The company scoops up brand-name items at steep discounts from
suppliers stuck with too much merchandise as traditional chains
lose sales and close stores.
In addition, more brands are making goods specifically for TJX,
which is one of the few retailers to post consistent sales
growth.
"We are seeing fantastic, widespread availability of quality,
branded merchandise and are in a great position to capitalize on
these opportunities," Chief Executive Ernie Herrman said.
Home Depot lowered its sales forecast for the year after its
third-quarter revenue fell short of Wall Street expectations.
Same-store sales were up 3.6% for the period, below the 4.7%
analysts were expecting.
Shares of Home Depot, which have rallied about 40% this year,
lost 5.4% on Tuesday. Shares of Kohl's fell more than 19%, while
TJX gained 1.8%.
Ms. Gass said that despite challenges in the most recent
quarter, 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.
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."
Third-quarter sales at Home Depot rose 3.5% from a year earlier
to $27.22 billion. Overall, the company posted net income of $2.77
billion, compared with $2.87 billion a year ago.
Home Depot executives said the number of transactions over
$1,000 climbed 4.8% from a year earlier.
"The consumer is alive and well," said Richard McPhail, the
chief financial officer at Home Depot. "It was one of the most
balanced quarters we've had in a long time."
--
Patrick Thomas
contributed to this article.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com and Allison
Prang at allison.prang@wsj.com
(END) Dow Jones Newswires
November 20, 2019 02:47 ET (07:47 GMT)
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