Seven Ways To Ka-Ching With Retailers
With consumer spending sapped over the past year by a sinking economy, massive layoffs, and tanking home prices, investors have been concerned on the financial health of retail stores. At the start of the second quarter earnings report season, conventional wisdom believed that off-price retailers would fare well while luxury retailers would be hit as consumers focused on price and necessities.
Retail Sector Earnings: Second Quarter Report Card
Most retailers have now reported their fiscal second quarter earnings. Much to the relief of investors, earnings have not been as bad as feared. Offsetting steep declines in sales with store closures, inventory cuts, and other cost reduction measures most retail stores beat second quarter earnings forecasts.
While industry profits declined for the ninth straight quarter, the 8% decline in year-over-year second quarter earnings was less than half the magnitude estimated at the depth of the recession in late March.
There were some surprises too. Discounter Wal-Mart (WMT) reported ho-hum results while competitor Target (TGT) exceeded analysts' forecast by nearly 20%. In high-end retailing, Nordstrom (JWN) reported profits in line with analysts' forecast while Saks (SKS) lost less than feared.
Among building materials retail stores, Lowe's (LOW) disappointed while Home Depot (HD) did not. In department stores, Kohl's (KSS) reported a profitable quarter while J. C. Penney's (JCP) results broke-even.
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