U.S. retailers’ results cloud holiday outlook
Stressed shoppers being more choosy
Major retailers reported mixed performances this week for the third quarter, illustrating how volatile the exit has been from a pandemic.
On Thursday, Macy’s reported its sales and profit slid in the quarter as the department store chain stepped up discounts amid a pullback from shoppers stung by inflation.
Yet, the New York Citybased company topped Wall Street expectations and raised its earnings outlook, partly because of better credit card revenue. Shares of Macy’s Inc. rose 15% to close at $22.67 on Thursday after its quarterly financials were released.
Shares of rival Kohl’s Corp., meanwhile, rose 5.5% to $31.42 after the retailer withdrew its earnings outlook Thursday amid volatile spending, an uncertain economic environment and a CEO transition. Like Macy’s, it reported a drop in sales and profit, but beat Wall Street expectations.
Target posted a 52% drop Wednesday in third-quarter profits after it also slashed prices in the third quarter. Walmart, which has a more robust grocery aisle and is the nation’s largest retailer,
reported better-than-expected earnings Tuesday and raised its earnings outlook.
What’s clear is that shoppers stressed by inflation are being far more choosy when it comes to discretionary purchases, products on which retailers like Target rely more heavily. Moreover, Target, Macy’s and Kohl’s all noted a slowdown in spending in the past few weeks as the kickoff to the Christmas shopping season approaches.
It’s a different scenario compared with a year ago when shoppers were buying early because supply chain issues were delaying orders. There were few price cuts because inventories were lean.
Overall, Macy’s posted net income of $108 million Thursday, or 39 cents per share, for the three-month period that ended Oct. 29. That compares with $239 million, or 76 cents per share, for the year-ago period.
Adjusted results were 52 cents per share, far exceeding the per-share earnings of 18 cents that Wall Street had expected, according to a survey by FactSet. Sales slipped 3.9% to $5.23 billion, from $5.44 billion in the year-ago period, but that also beat expectations.
Comparable sales — those from established stores and from online — slipped 2.7% compared with the year-ago quarter but were up 6% compared with the third quarter of 2019, before the pandemic.
Online sales fell 9% compared with the third quarter of 2021 but were up 35% compared with the third quarter of 2019.
Macy’s CEO Jeff Gennette said the company’s upscale Bloomingdale’s store has also fared well as wealthy shoppers continue to spend. Shares of Macy’s Inc. have dropped 17% this year through Thursday.
Gennette said shoppers’ focus on sales merchandise will make the period between Thanksgiving and Christmas “more intense” and that Macy’s is ready to ramp up discounts when needed.
KOHL’S PULLS FORECAST
A difficult macroeconomic environment and the unexpected departure of CEO Michelle Gass caused Kohl’s to withdraw its full-year profit forecast, the company said Thursday.
Kohl’s reiterated its preliminary third-quarter results reported last week, when it said Gass would step down, but declined to provide guidance for the current quarter in an earnings statement.
The company also had cut its outlook in August, saying it expected no more than $3.20 a share in adjusted earnings this year, less than half of the previous guidance.
The abandoned forecast deepens uncertainty swirling around the discount department-store chain amid high inflation, which has made the company’s middle-income customers more price-conscious. Kohl’s said it began to see more pronounced softness in late October and early November, which partly prompted its decision to pull its guidance.
“It’s really about the unpredictability and volatility in the trends over the last couple weeks,” Chief Financial Officer Jill Timm said on a conference call.
Shares of Kohl’s Corp. have tumbled nearly 40% this year through Thursday, compared with a 17% decline for the S&P 500 Index.
Gass is leaving for the top job at Levi Strauss & Co. but will remain in the CEO role at Kohl’s through the end of November. Board member and industry veteran Tom Kingsbury will serve as the interim chief while Kohl’s seeks a new leader.
Investors have urged the Menomonee Falls, Wis.-based company to sell itself after a long stretch of weak sales.
Kohl’s has been trying to work through excess inventory that piled up from sinking demand and over-ordering after last year’s shortages. Inventories rose 34% in the third quarter from a year earlier, an improvement from 48% growth in the three-month period through July.
Kohl’s funded a $500 million share-repurchase program in August and said it completed the plan earlier this month.
As Kohl’s reported last week, adjusted earnings fell to 82 cents per share in the third quarter, a 50% decline compared with a year ago, while sales fell 7.2% to $4.05 billion. Comparable sales slid 6.9%.