Department store sales weak, but beat Street
LOS ANGELES (Reuters) - The weak economy took its toll on department stores on Thursday, as retailers Nordstrom, Kohl's and J.C. Penney reported lower first-quarter net profits, with all citing challenges stemming from the weakened U.S. economy.
Although the results were glum, investors had expected worse -- all three retailers beat Wall Street expectations for the first quarter, despite the slump.
Weak sales hit mid- and high-priced retailers alike, with J.C. Penney Co Inc (JCP.N) and Nordstrom Inc (JWN.N) reporting lower total sales in the quarter. Sales at Kohl's Corp (KSS.N) rose a scant 1.5 percent, but its same-store sales fell, like the others.
U.S. retailers have been feeling the pinch of the economy. Shoppers' ability to spend has been squeezed by high gas prices, rising food costs, a deteriorating housing market, a credit crunch and weakening job market.
Both Nordstrom and Kohl's lowered their profit view for the full year from earlier estimates.
"This is where the smart boys and girls have to sharpen their pencils to see if they can outsmart their competition," said Patricia Edwards, managing director at investment firm Wentworth, Hauser and Violich, which owns shares of Nordstrom, and tracks the other companies.
"These beats tell me the retailers are doing what they're supposed to be doing," she said. "The trick is how long can they keep this running in this type of environment. It's easy to pull this out in one quarter. It's not as easy to do this in three or four if the environment stays lousy."
A 24 percent decline in net profit at Nordstrom, to $119 million, or 54 cents per share, was above analysts' average expectations, according to Reuters Estimates.
But sales fell 4 percent in the quarter and the company said it now expects fiscal 2008 sales at stores open at least a year to fall between 4 percent and 6 percent from an earlier range of flat to negative 2 percent.
At Kohl's, net profit fell 27 percent to $1.53 million, or 49 cents per share, versus the 44 cents expected by Wall Street.
Chief Executive Larry Montgomery said in a statement that Kohl's would be "conservative" in its sales expectations for the rest of the year.
NO ONE IS IMMUNE
Earlier in the day, J.C. Penney posted a 50 percent drop in net income, to $120 million, or 54 cents per share. Like the others, earnings were above Wall Street estimates, in this case 50 cents.
Thursday's results showed that luxury retailers are not immune to the downturn. Generally considered more insulated from economic weakness due to more disposable income from their higher-income shoppers, retailers such as Saks Inc (SKS.N) and Neiman Marcus have noted softer sales in recent months.
On Wednesday, Macy's Inc (M.N) Chief Financial Officer Karen Hoguet said its higher-priced chain, Bloomingdale's, had a "tougher" quarter. Continued...
