Retailers' Results Signal Competitive Holiday Sales -- WSJ
November 10 2017 - 3:02AM
Dow Jones News
Macy's, Nordstrom and Kohl's have mixed quarter in 'era of the
consumer'
By Suzanne Kapner and Austen Hufford
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 10, 2017).
Macy's Inc., Kohl's Corp. and Nordstrom Inc. reported mixed
third-quarter results on Thursday, underscoring the challenges
department-store chains face as shoppers buy more online and
setting the stage for a competitive holiday season.
Kohl's pointed to a strong back-to-school season, leading to
surprise, if slight, growth in sales at stores open at least a
year. Macy's, meanwhile, said it increased its gross profit margin,
thanks to efforts to control spending on inventory. Nordstrom swung
to a profit but reported a decline in same-store sales, dragged
down by its department stores.
Shares of Macy's rose 11% on Thursday as the company's profit
exceeded Wall Street's estimates. Kohl's margins fell short of
expectations, but its stock inched up 0.9%. Nordstrom shares gained
4.5% before losing ground in after-hours trading after the company
posted its results.
Kohl's Chief Executive Kevin Mansell said the gross-margin
decline was partly due to higher shipping costs associated with an
increase in online orders. He added that store traffic and sales
picked up in late October, after a lull in September, setting the
retailer up for a strong year-end finish. "We're super confident as
we go into the fourth quarter, " Mr. Mansell said.
The shift to online shopping has hurt traditional retailers
across the board. The impact on department stores has been
particularly sharp, since they sell branded goods whose prices
shoppers can easily compare online. The shakeout has prompted
chains such as Macy's, J.C. Penney Co. and Sears Holdings Corp. to
close hundreds of stores, many of them in malls that shoppers
aren't visiting as frequently.
Kohl's, whose stores aren't located in malls, has refrained from
mass store closures and, according to Mr. Mansell, has picked up
market share from rivals that are pulling back. It has also added
popular athletic gear from Under Armour Inc. and partnered with
Amazon.com Inc. to sell its Echo device and other products and to
accept returns for items purchased through the online retailer.
Macy's has revamped its shoe and jewelry departments, expanded
its Backstage discount concept in its chain and leased space to
third parties such as LensCrafters. But analysts say the moves
haven't been enough.
"As much as these things are valuable, they do not address the
fundamental issues facing the business," wrote Neil Saunders, a
managing director of research firm GlobalData Retail, in a note to
clients.
Macy's CEO Jeff Gennette acknowledged the challenges in an
interview. "This is clearly the era of the consumer," he said.
"They are very smart. They have more choices than ever. We at
Macy's have to earn our share of their wallet."
Sales at Macy's stores excluding recently opened or closed
locations fell 4% in the three months to Oct. 28, extending a
string of declines. Total sales in the fiscal quarter fell 6.1% to
$5.28 billion, partly due to store closures.
Macy's profit more than doubled to $36 million from $17 million
in the year-earlier period, as the company did a better job of
controlling costs.
Kohl's comparable sales rose 0.1% in its fiscal third quarter,
the retailer's first uptick in more than a year. Total sales rose
0.1% from a year earlier to $4.33 billion. Net income dropped 18%
to $117 million, as gross margin narrowed to 36.8% from 37.1%.
Sales at both chains were hurt by the recent hurricanes in the
country and unusually warm weather in September, the companies
said. Macy's also said it felt the impact from less foreign
tourism. Still, both companies managed to reduce inventory in the
period, leaving them with less excess merchandise to clear out at
steeply reduced prices.
At Nordstrom, total sales increased 2% to $3.5 billion, but
same-store sales declined 0.9%. Nordstrom Rack, its discount chain,
eked out a 0.8% same-store sales gain.
Profit totaled $114 million, compared with a $10 million loss a
year ago that included a write-down of its Trunk Club brand.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com and Austen
Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
November 10, 2017 02:47 ET (07:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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