Stage Stores struggles in the first quarter, Children’s Place posts gains and Delta Galil has mixed results.
Stage Stores Inc. saw sales and earnings drop in the first quarter, but management said it’s making progress in improving profits and operations.
In the period ended April 29, Stage Stores reported a net loss of $19 million, or 70 cents per diluted share, versus a net loss of 57 cents per diluted share for the prior year. Sales in the first quarter decreased 7.3% to $308.6 million, compared to $332.8 million in the prior year. Comparable sales decreased 9.6%.
On an adjusted basis, first quarter net loss was $15.0 million, or 55 cents per diluted share, compared to an adjusted loss of 56 cents in the first quarter of 2016. Adjusted 2017 guidance excludes after-tax charges associated with the acquisition of Gordmans, store closures and other strategic initiatives totaling about 18 cents per diluted share.
“We are pleased to have improved adjusted earnings to last year,” said Michael Glazer, president and chief executive officer. “Our team has worked hard to increase merchandise margins by nearly 170 basis points, control inventories, which were down 6% excluding Gordmans, and grow our direct-to-consumer business in the first quarter. After a challenging February in which we saw negative double-digit comps, we began to gain momentum and our business improved significantly during the combined March and April period. While we expect retail headwinds to continue in the near term, we believe that our selective acquisition of prime Gordmans’ assets allows us to diversify with an off-price business model.”
Glazer said the retailer expects the acquisition to add scale to its business and be accretive to earnings in 2018.
For the remainder of 2017, the company expects sales, inclusive of the Gordmans business, to be in a range of $1.57 billion to $1.62 billion, assuming a comparable sales decline for the existing Stage business of 4 percent to 8 percent. Total sales include the impact of a 53rd week, while comparable sales reflect a 52-week period.
The Children’s Place Inc. scored strong profit and income gains in the first quarter and upped its outlook for the rest of the year.
Net sales in the period increased 4.1% to $436.7 million, as comparable retail sales increased 6.1% in the three months. Net income rose 39% to $36.2 million, or $1.97 per diluted share, in the quarter, compared to net income of $26 million, or $1.33 per diluted share, the previous year.
Gross profit increased 3% to $170.6 million in the quarter, compared to $165.4 million in the first quarter of 2016. The specialty retailer credited the penetration of its e-commerce business for driving up comparable retail sales, operating profit, operating margin rate and earnings per share.
Operating income gained 6.8 percent to $42.3 million, compared to $39.6 million in the first quarter of 2016.
Jane Elfers, president and chief executive officer, said, “We continued to deliver outstanding operating results in the first quarter. Comparable retail sales, operating margin and earnings per diluted share were significantly above both last year and the high end of our guidance range. Our first quarter comparable retail sales increased 6.1%, our highest Q1 comp in over a decade, on top of a positive 5.1% comp in the first quarter of 2016. We generated positive comps in both our brick and mortar and digital channels for the quarter and our traffic continued to improve sequentially compared to the fourth quarter.”
Elfers said the company continued to make significant progress on its key strategic growth initiatives—superior product, business transformation through technology, alternate channels of distribution and fleet optimization.
“As we look to the future, developing and implementing a best in class Personalized Customer Contact Strategy is our single biggest opportunity,” Elfers added. “Given the ongoing shift to digital commerce, our digitally savvy millennial Mom, our consistently strong operating results and the changes in competitor dynamics, we have made the decision to significantly accelerate the development and implementation of this substantial opportunity.”
The company is updating its outlook for fiscal 2017 and now expects adjusted net income per diluted share to be in the range of $7.10 to $7.20, inclusive of an 89 cents benefit resulting from new accounting rules for the income tax impact on share-based compensation. This compares to previous guidance for adjusted net income per diluted share of $6.50 to $6.65, inclusive of a 45 cents benefit resulting from the new accounting rules, and to adjusted net income per diluted share of $5.43 in fiscal 2016. This guidance assumes an approximate 3% increase in comparable retail sales for the year.
Delta Galil Industries posted a substantial sales increase in the first quarter ended March 31, but saw profits and net income drop.
The global manufacturer and marketer of branded and private label apparel products reported sales of $315.7 million in the quarter, a 23% increase compared to $256.7 million for the same quarter last year. The increase was primarily driven by the addition of Delta Premium Brands.
Operating profit fell 31% to $10.2 million in the quarter, compared to $14.8 million in the year-ago period.
Net income dropped 29% to $5.6 million in the three months versus $7.9 million in the first quarter last year.
Isaac Dabah, CEO of Delta Galil, said, “Our first quarter results were in line with our plan and consistent with Delta’s historical performance of generating higher profits in the second half of the year. During the quarter, we made meaningful changes in our company that will improve our efficiency and production capacity. We started to run our Vietnamese factory with 750 new employees and are on track to have our first orders shipped in April 2017. We expect the facility to reach full operational status in 2018.”
Dabah also noted the company’s new licensing deal with Calvin Klein Inc. to develop, produce and distribute boys’ and girls’ underwear, sleepwear and socks for the brand as “an important step in our ongoing strategy of enhancing our branded portfolio and broadening our presence in the premium sector.”
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