Emerging Rift Between Retailers – US-FOREX.US
Retailers are wielding the same weapons-clearances, cost-cutting and promotions-to rid stock rooms of excess inventory while keeping cash registers ringing. The results, however, have been mixed as discounters and moderately priced retailers continue to seize market share from luxury department stores.Buying behavior will come into focus on Thursday as retailers across the price spectrum report quarterly earnings for a period in which consumers continue to limit spending on nonessentials despite slight economic improvement.
Wal-Mart Stores
, a favorite for food and basics among bargain hunters, is expected to be among the strongest reporting on Thursday. The mega retailer expects a second-quarter profit between 83 cents and 88 cents a share. Some analysts suspect earnings may be at the low end of the range and that comparables will be difficult because of the company’s strong year-ago second quarter. “While food deflation will present a near-term challenge to comps, the waning impact of last year’s stimulus, accelerating traffic and continued market share gains should support a return to more normalized comps in the second half of 2009,” said Baird analyst Peter Benedict. UBS analyst Neil Currie recalls management’s caution regarding second-quarter headwinds from foreign exchange rates and strong year-ago sales resulting from the 2008 stimulus. Currie anticipates a quarterly profit of 83 cents a share and cut year-end guidance to 3.56 from 3.58 a share, while the consensus estimate is for earnings of 86 cents a share on sales of 103.1 billion and a year-end profit of 3.56 a share. “Key focus will be on inventory levels after two sequential quarterly declines. Additionally, what Wal-Mart says about the consumer should be important for market sentiment, and any meaningfully cautious noises could impact stocks across various sectors,” Currie said.
Moderately priced department store chain Kohl’s
may be the real standout of Thursday’s earnings lineup, which also includes Nordstrom
and cosmetics company Estee Lauder
. Kohl’s surprised the market last week with a same-store sales gain of 0.4% in July; analysts had expected a 3.2% decline. The company lifted its second-quarter earnings forecast to a range of 73 cents to 74 cents a share, from between 56 cents and 64 cents a share. The company, which opened nearly 20 stores this Spring-most of which were former Mervyn’s locations-has picked up market share from rivals who have buckled under financial pressures. Kohl’s, which sells clothing and home basics, seems to also be benefiting from consumers continued purchases of no-frills necessities. Analysts polled by Thomson Reuters anticipate a second-quarter profit of 74 cents a share on sales of 3.8 billion.Challenging sales are expected to continue for upscale retailer Nordstrom since the luxury store segment remains under pressure as weak job and housing markets prevent consumers from splurging. Analysts suspect that second-quarter promotional activity needed to coax reticent shoppers into stores may weigh on Nordstrom’s profit margins. The Street is expecting earnings of 48 cents a share on sales of 2.1 billion.”Department store trends have improved slightly since March,” said UBS analyst Nik Modi. “However, we note that same-store sales trends in higher-end retail outlets such as Neiman Marcus, Saks and Nordstrom’s have not shown meaningful acceleration in the most recent months. Lower-end outlets like Kohl’s have been showing the greatest improvement, which could have mixed implications for beauty players within this channel.”Although trade-down trends in the prestige beauty category continue to pressure sales at Estee Lauder, Modi said shares might trade higher on Thursday if the company can show that conditions are getting better despite the difficult environment. Analysts are projecting fourth-quarter earnings of 20 cents a share on sales of 1.7 billion. Shares across the retail sector were trading broadly higher during Wednesday’s afternoon trading session. Earlier, Macy’s
credited better-than-expected profits to diligent expense management. Shares of Estee Lauder were up by 98 cents, or 2.7%, at 37.96; Nordstrom’s stock gained 13 cents, or 0.4%, at 29.53; and Kohl’s stock added 2 cents to 52.53. Wal-Mart shares were up by 96 cents, or 1.9%, at 50.73, and Macy’s was ahead by 1.08, or 7%, at 16.55. The Retail HOLDRs
exchange-traded fund was up by 1.35, or 1.6%, at 85.11.
The Associated Press contributed to this article.