07 Jan Retailers report upbeat holiday sales, but investors remain downbeat
Same-store sales were up at Macy’s and J.C. Penney but shares are down sharply in Thursday trading
Macy’s Inc. and J.C. Penney Co. Inc. reported same-store sales increases during the holiday shopping period, while Victoria’s L Brands Inc., fresh off of an analyst upgrade, issued a profit warning.
Still, shares are down for all three retailers, along with many others across the sector. Macy’s and J.C. Penney shares were each down more than 5% in early Thursday trading, while L Brands took the largest tumble of 15%.
Macy’s said same-store sales during the months of November and December 2017 rose 1% on an owned basis and were up 1.1% on an owned-plus-licensed basis. The company saw double-digit growth online and improved holiday sales across Macy’s, Macy’s Backstage, Bloomingdale’s and its outlet, and the beauty brand Blue Mercury.
Macy’s Chief Executive Jeff Gennette says the same-store sales result sets the retailer up “for a positive fourth quarter.” The fourth-quarter FactSet consensus is for same-store sales decline of 1.7%.
Included in announced cost management efforts will be staffing adjustments, with some stores seeing reductions as others hire, and 11 store closures in early 2018. Four of those closures were previously announced. Stores will close in Miami, Los Angeles, San Francisco and other cities nationwide. That brings the number of shuttered stores since 2015 to 124.
Macy’s expects annual expense savings to total $300 million beginning fiscal 2018, and one-time charges of $160 million, or about 33 cents per share, which will be booked in the fourth quarter.
Macy’s also updated its guidance, and now expects full-year adjusted earnings per share of $3.59 to $3.69 including tax reform measures, versus previous guidance of $3.38 to $3.63. The company expects same-store sales on an owned basis to decline between 2.4% and 2.7%, and a decline between 2% and 2.3% on an owned-plus-licensed basis. Sales are expected to be down between 3.6% and 3.9%.
The FactSet consensus is for full-year EPS of $3.44 and a same-store sales decline of 3.4%. Macy’s expects a non-cash tax benefit in fiscal 2017 of $550 million to $650 million from the federal tax rate reduction.
“The holiday sales growth at Macy’s is a welcome change from the red numbers it usually posts,” said Neil Saunders, managing director of GlobalData Retail. “Moreover, it sends a positive signal that other retailers are on course for a solid holiday season.”
Still, there are issues to be mindful of, including “relatively weak” growth that was “far less than the overall sector,” he said. Saunders also expressed concerns that the improved performance comes as a result of the consumer’s willingness to spend rather than any particular measures Macy’s has taken.
“[W]e maintain that the focus should be on growing the top line through improvements to stores, ranges and the general proposition,” Saunders said. “In our view, Macy’s still has an enormous amount to work to do here.”
J.C. Penney Co. Inc. reported a 3.4% same-store sales increase for the nine weeks ending Dec. 30, 2017, and reaffirmed its full-year guidance. The fourth-quarter FactSet consensus is for same-store sales growth of 0.8%.
The retailer saw improved same-store performance across apparel, particularly in women’s and kids, and double-digit sales growth in e-commerce, according to a statement from Chief Executive Marvin Ellison. And the company is now able to fill e-commerce orders from all of its brick-and-mortar stores.
J.C. Penney reaffirmed its previous guidance for full-year fiscal 2017 adjusted earnings per share of 2 cents to 8 cents and flat to a 1% same-store sales decline. The FactSet consensus is for EPS of 7 cents and a same-store sales decline of 0.5%.
L Brands Inc. reported of $2.52 billion for the five weeks ending Dec. 30, up from $2.44 billion last year. Same-store sales were up 1% for the period.
The company expects to report fourth-quarter earnings per share of about $2 before the impact of one-time items or tax reform measures, compared with guidance of $1.95 to $2.10. The FactSet consensus is $2.03.
At Victoria’s Secret, “growth in the beauty and Pink businesses was more than offset by a decline in lingerie,” said Chief Investor Relations Officer Amie Preston on the pre-recorded earnings call, according to a FactSet transcript.
“[W]e monitor for consistent improvements in a more balanced lingerie assortment, which can help support price improvements,” wrote Cowen & Company analysts led by Oliver Chen. “Further, we watch for prospects for improved store traffic (store comps -6% at Victoria’s Secret during December) that is not driven by promotional activity, which could include targeted direct mail.”
Macy’s shares are down 31.7% for the last year, J.C. Penney shares are down 57% for the period, and L Brands’ stock has fallen 24.2%. The S&P 500 index SPX, +0.70% is up 20% for the past 12 months.