Retailers report revenue growth

Gain by Target most in 13 years

Three large retailers reported higher-than-expected same-store sales Wednesday, nearly a week after Walmart Inc. posted strong secondquarter results. Industry analysts expect retail sales to remain solid for the rest of the year unless talk of trade wars erodes consumer confidence.

Walmart rival Target Corp. saw comparable sales grow 6.5 percent over the same quarter last year — its biggest such gain in 13 years. The Minneapolis-based retailer reported net income up 19 percent to $799 million, or $1.49 per share, from $671 million, or $1.22 per share, a year ago. Target attributed its gains to a 6.4 percent rise in store traffic as well as a 41 percent jump in online sales over last year’s second quarter.

Kohl’s Corp.’s net income leaped 40 percent to $292 million, or $1.76 per share, from $208 million, or $ 1.24 per share, a year ago. Same-store sales, considered a key indicator of a retailer’s health, rose 3.1 percent.

The TJX Cos. Inc., parent company of Marshalls, Home Goods and T.J. Maxx, saw 6 percent growth in same-store sales. The off-price retailer posted net income of $739.6 million, or $1.17 per share, up 33.7 percent from $553 million, or 85 cents per share, in last year’s second quarter.

All these results appear to shore up the National Retail Federation’s expectation that 2018 retail sales will increase at least 4.5 percent over 2017. That figure excludes sales of automobiles and at gas stations and restaurants.

“Higher wages, gains in disposable income, a strong job market and record-high household net worth have all set the stage for very robust growth in the nation’s consumer-driven economy,” Matthew Shay, the federation’s president and chief executive officer, said in a news release.

“We knew this would be a good year, but the first half turned out to be even better than expected,” Shay said. “However, a tremendous amount of uncertainty about the second half remains.”

That uncertainty revolves around tariffs on goods from China. A tariff of 25 percent was imposed on $34 billion worth of Chinese goods in July, with another $16 billion worth scheduled to be added this month.

The tariffs imposed so far, though, affect a relatively small number of consumer goods, the federation said in a news release. Another round

of tariffs on $200 billion of Chinese imports, currently under consideration, would include many more products consumers use every day.

July’s retail sales figures, however, showed no sign of consumer angst, according to a report the federation issued last week. It showed the month’s unadjusted retail sales up 4.9 percent from July 2017, and up 0.4 percent seasonally adjusted from June.

Federation chief economist Jack Kleinhenz said in the report that those numbers give the retail industry a “solid kickoff” for the third quarter, and show consumers continuing to spend despite concerns about tariffs. He cited consumer confidence, a strengthening labor market and more after-tax dollars in shoppers’ pocketbooks.

The July numbers “mirror the economy, which is in very good shape,” Kleinhenz said. “Consumer fundamentals remain healthy and continue to provide wherewithal for consumers to drive domestic economic growth.”

The federation does not comment on any company or its financial performance. And Kleinhenz pointed out that nearly 90 percent of retail firms have fewer than 20 employees, “and thus Main Street is different than Wall Street.”

Speaking generally, however, Kleinhenz said Wednesday that “solid growth in the second quarter … appears to have provided the economy with momentum to carry it forward. While head winds are evident, no sign of a slowdown has occurred.”

As for how present and proposed tariffs may affect retail sales for the rest of the year, especially as the Christmas shopping season approaches, Kleinhenz said, “This is a complex calculation since we don’t know when, how and what exactly may occur.”

“The devil is in the details and there are likely indirect effects that feed both upstream and downstream,” he said. The federation’s forecast does not include escalation of tariffs, Kleinhenz said, but such escalation “will likely weigh on GDP and growth, and elevate inflation. Some firms will be able to absorb the rise in costs.”

Aside from trade concerns, retailers can keep the momentum going by focusing on customer experience, both in stores and online.

“Firms must create a great experience and value for consumers and make it easy and convenient,” Kleinhenz said. “They need to invest in their employees, their brands and capabilities to deliver in an omnichannel environment, and that is taking place.”