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Retail roundup: Emphasis remains on off-price
Third quarter sales disappointed for Macy’s and Nordstrom, both of which continue to emphasize their outlet channel over full-price stores.
Both Macy's and Nordstrom reported disappointing results for the third quarter, and moving forward the two will focus on their off-price divisions, Backstage and Nordstrom Rack, pictured here.
New York--The third quarter was a rough one for U.S. department stores.
Both Macy’s and Nordstrom recorded disappointing results and lowered revenue, earnings and same-store sales projections for the year. Going forward, both chains are putting their money behind the outlet store segment of their business.
Off-price retailer Kohl’s recorded only a 1-percent increase in same-store sales due to a weak September and warm temperatures cutting into seasonal purchases, while J.C. Penney outperformed them all.
The Plano, Texas-based retailer recorded the strongest increase in same-store sales among the four chains and, though it cut its losses, the company still isn’t turning a profit.
Highlights from each retailer’s third quarter earnings reports are below.
Macy’s Inc.
Macy’s Chairman and CEO Terry Lundgren said he was “disappointed” with the company’s third quarter performance. He described spending by U.S. consumers as “tepid” and said international customers remain reticent to spend as well.
Same-store sales fell 4 percent year-over-year in the period ended Oct. 31. Total sales reached $5.87 billion, down 5 percent from $6.20 billion in the third quarter last year.
Gross margin improved slightly, from 39.2 percent to 39.8 percent. Net income fell from $217 million to $117 million.
In the third quarter, the retailer opened only one new full-price Macy’s store, in Ponce, Puerto Rico, but rolled out five of its new off-price Macy’s Backstage stores, which just debuted this fall. In the fourth quarter, one full-price Bloomingdale’s store is slated to open, in Honolulu, along with three Bloomingdale’s Outlets and another Backstage store.
Its emphasis on the off-price channel will continue.
Macy’s announced along with its third quarter earnings that it will open about 50 Backstage stores in off-mall locations over the next two years, and in spring 2016, will open up to 10 Backstage stores within existing Macy’s stores, creating a “new hybrid store” that Macy’s said is the first of its kind in retail.
Nordstrom Inc.
Nordstrom’s third quarter performance was below expectations, the company said.
Same store sales for the period ended Oct. 31 increased less than 1 percent year-over-year. Net sales were up 7 percent from $3.04 billion to $3.24 billion.
Markdowns and higher occupancy costs, accrued as the company opened more stores, particularly off-price stores, ate into gross profit. Gross profit totaled $1.01 billion, or 33.9 percent of net sales, compared with 35.5 percent of net sales in the third quarter 2014.
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The company’s best-performing product category was cosmetics while its top business segment was off-price, particularly online.
Net sales for NordstromRack.com and HauteLook, its members-only flash-sale website, were up 39 percent year-over-year in the period, “continuing to outperform expectations,” the company said. Nordstrom Rack saw net sales increase 8 percent while same-store sales were down 2 percent.
By comparison, net and same store sales fell 2 percent for full-price Nordstrom stores.
Like Macy’s, Nordstrom’s emphasis is on its off-price business. The company opened five times as many Nordstrom Rack stores (16) in the quarter as it did full-price stores (three.) Nordstrom also opened its first store outside the United States in the quarter, in Vancouver, British Columbia.
J.C. Penney Company Inc.
Same-store sales increased 6 percent for J.C. Penney in the third quarter ended Oct. 31 while total sales rose 5 percent to $2.9 billion.
Though the retailer has reported strong fine jewelry sales in recent quarters, jewelry was not listed among its top sellers for the third quarter. J.C. Penney said that men’s, home, footwear, handbags and Sephora were its top-performing divisions.
Improvements in the clearance and promotional selling margins, along with improvement in supply chain productivity, helped to boost gross margin from 36.6 percent to 37.3 percent.
Losses shrunk from $188 million to $137 million.
Commenting on the results, new CEO Marvin Ellison said, “The continuation of our strong sales performance this quarter demonstrates ongoing progress toward achieving the company’s long-term financial targets … As we look ahead to the fourth quarter, we are well positioned to compete effectively during the key holiday shopping period thanks to the hard work and dedication of all our associates.”
Kohl’s Corp.
Same-store sales were up 1 percent year-over-year in the third quarter ended Oct. 31 for off-price retailer Kohl’s.
Total sales also increased 1 percent, rising from $4.37 billion to $4.42 billion.
Gross margin held steady at 37 percent. Reported net income fell from $142 million to $120 million.
Kohl’s ended the quarter with only a few more stores than it had at this time last year--1,166 compared with 1,163.
Chairman, CEO and President Kevin Mansell said that the company had strong back-to-school sales and did well in late October, but those gains were offset by a slow September and weakness in seasonal businesses.
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