NEW YORK — With the bulk of the holiday shopping season ahead, retailers have reason for some optimism.
Among the companies reporting quarterly results Wednesday, earnings were mixed but sales were strong. And of the few retailers who released same-store sales after the market closed, comps were robust. There were also signs that key retailers, such as Tiffany & Co., had developed enough momentum heading into the holiday shopping season to propel results.
Tiffany delivered a 23 percent profit gain for the third quarter on a 10 percent sales gain. Chico’s FAS posted a 21 percent earnings decline on a 13 percent sales gain. Aéropostale’s net income rose 25 percent on a 19 percent sales gain. Regarding November same-store sales, American Eagle Outfitters said comps gained 14 percent while skate lifestyle retailer Zumiez posted a 12.1 percent gain. Hot Topic’s comps declined 4.3 percent, but were better than expected.
On Wall Street, the market reversed course after two days of red, after a government report on the gross domestic product that revealed better-than-expected strength. The Dow Jones Industrial Average rose 0.7 percent, or 90.3 points, to 12,226.73 while the S&P Retail Index gained 1 percent to 499.03.
Regarding holiday sales, FTI Consulting said Wednesday that it is forecasting a 4.8 percent increase in sales for the period including this month through January. This compares with an actual increase of 6.9 percent last year. In a separate report, total online purchases on Cyber Monday jumped 26 percent to a record $608 million, according to the figures from ComScore Networks. There were also other pockets of optimism in the market.
In a survey released by Accenture, consumers said they not only prefer gift cards, but plan to spend more than the value of the cards they receive. “Gift cards have the potential to change holiday retailing, and retail in general, as much as online shopping has,” said Janet Hoffman, managing director of Accenture’s North American retail practice.
According to quarterly results released Wednesday, luxury goods retailer Tiffany said net income for the three months ended Oct. 31, jumped to $29.1 million, or 21 cents a diluted share, from $23.8 million, or 16 cents, in the same year-ago quarter. Sales climbed to $547.8 million from $500.1 million. U.S. retail sales gained 9 percent to $270.4 million, while same-store sales rose 6 percent. Comps at the Manhattan flagship on Fifth Avenue rose 13 percent and 4 percent at branch stores. International sales rose 9 percent to $221.7 million. Strong sales in many overseas markets compensated for weaker results in Japan.
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For the nine months, net income dipped 0.8 percent to $113.4 million, or 80 cents, from $114.4 million, or 79 cents, in the same year-ago period. Sales rose 8.2 percent to $1.66 billion from $1.54 billion.
James Fernandez, chief financial officer of Tiffany, told Wall Street during a conference call, “Tiffany’s worldwide sales growth in November to date is currently running ahead of our expectation….Of course, keep in mind that the vast majority of Tiffany’s holiday business to be transacted is still ahead of us in December, so we will not and would advise you not to extrapolate results in November to the entire holiday season and fourth quarter, but at least we are enjoying a good start.”
The company is expecting U.S. comp-store sales to rise in the high-single digits, and international comps, on a constant exchange basis, to grow in the midsingle digit range. James Hurley, luxury goods analyst at Telsey Advisory Group, observed, “For Tiffany, they have great momentum heading into the fourth quarter. The company noted the acceleration of business trends in November, and it is better than what we’ve heard from other luxury players in the U.S.”
While other firms may be looking at moderating trends, Tiffany has some catalysts working in its favor, according to Hurley. Those factors include a fully renovated flagship on Fifth Avenue and incremental sales gains with the Frank Gehry launch, which targets a new customer profile for the retailer. Tiffany also sees strong growth in transactions over the $20,000 range, suggesting that the luxury customer is still interested in what Tiffany has to offer.
“I was at the Short Hills mall [in New Jersey] and at Tiffany’s Manhattan flagship on Black Friday,” Hurley said. “The [Tiffany] stores were unbelievably packed. [Colleagues] were in San Francisco and Boston, and Tiffany was the most crowded store at the high end. There’s not really any reason for customers to shop at luxury stores on Black Friday because there’s no discounting. Yet the customer traffic at Tiffany was so strong.”
Charms are a new area of focus for Tiffany, and one that may be key for holiday. The company also expects to do more volume in the fourth quarter in sterling silver in giftable items.
At Chico’s FAS, executives said they would refrain from providing fourth-quarter guidance since the Christmas season has yet to come in, and, with the retailer’s recent volatility in same-store sales, they feared it would be viewed as a “low ball” or that they might make an estimate they could miss.
Chico’s lowered earnings were attributed to fashion blunders and costs from new store openings. For the quarter ended Oct. 28, profits at the women’s apparel retailer fell to $42.1 million, or 24 cents a diluted share, from $53.2 million, or 29 cents, in the year-ago period. Sales rose to $403.6 million from $358.7 million, while total same-store sales dipped 1.2 percent. By brand, Chico’s stores saw a 3 percent decrease in comps, while those at White House|Black Market rose 5 percent.
For the nine-month period, earnings dropped slightly to $148.5 million, or 83 cents a diluted share, from $149.5 million, or 82 cents, during last year’s period. Sales jumped 16.7 percent to $1.2 billion from $1.03 billion.
“The aggressive store opening/relocation/expansion program, combined with the operational initiatives in the technology and customer service areas we are undertaking, have put short-term pressure on our earnings,” said Scott Edmunds, president and chief executive officer, in a statement. “These factors, along with missteps in our fashion merchandising, have been the principal reasons for the volatility in our short-term profitability.”
Jennifer Black, analyst at the firm that bears her name, observed, “I do not think they will be able to fix the fashion issue in time for the holidays at Chico’s; however, they have been able to tweak the assortments coming in and cancel some orders.”
She added that, on the morning of Black Friday, Chico’s offered a $25 gift card for every $100 spent at White House|Black Market. “They have never utilized an incentive like this before, and it’s a great way to build store traffic. I think White House|Black Market will have a quicker turnaround. They are bringing back their strictly black-and-white merchandise and the new merchandise coming in looks great. It is simpler to fix that business than Chico’s. It will take a longer time to fix Chico’s, but they are making the right decisions, especially investing in their employees. Long term, their mistakes will make them a much better company,” Black said.
While Aéropostale’s focus on balancing fashion and basics paid off in the quarter as the company reported earnings results that exceeded its expectations, at least one analyst maintained his “sell” rating.
Eric Beder, at Brean Murray Carret & Col, which, on Monday, downgraded shares of Aéropostale to a “sell” from a “hold,” on Wednesday maintained his “sell” ratings after the chain’s earnings report.
“Virtually nothing in our thesis has changed as a result of the earnings release and comps; we continue to believe the company is unable to drive material sales growth without resorting to significant discounting, which will serve to limit bottom-line upside, especially as Aéropostale begins to anniversary its 50 percent-off sale for the holidays,” Beder wrote.
Aéropostale said net income for the three months ended Oct. 28 rose to $32.6 million, or 61 cents a diluted share, from $26.1 million, or 47 cents, a year ago. Sales for the quarter climbed to $385.5 million from $324.7 million last year.
For the nine-month period, earnings rose 17.1 percent to $49.4 million, or 91 cents a diluted share, from $42.1 million, or 75 cents a share, during the comparable period last year. Sales for the nine months increased 17.9 percent to $906.4 million from $769.1 million in the same period last year.
“Our overall results for the third quarter exceeded our initial expectations and are a result of broad-based improvements in our business,” said Julian Geiger, chairman and ceo, in a statement.
During the company conference call to Wall Street, Geiger said the company experienced “solid sales and margin growth in classifications which will continue to drive its business for the remainder of the year. We remain optimistic about our opportunities as we enter the key holiday selling season.”
For the holiday selling season, Aéropostale said it expects denim, fleece, outerwear and sweaters to drive business through Christmas, Geiger told analysts.
— With contributions from Liza Casabona