Sears narrows losses as the company continues to cut spending, Abercrombie sees traction from turnaround efforts led by Hollister and Burlington is bullish on expansion as sales soar.
In a Nutshell: Burlington reported increased traffic, which has been on an upswing for 10 of the last 12 quarters. The retailer counts home, better and active missy sportswear, men’s sports, men’s shoes and handbags as leaders in the second quarter. Going forward, the company sees opportunities in increased home, beauty and women’s apparel sales, particularly in national brands in the home sector, a rebuilt better and social dresses and suits department and investment in plus-sizes.
The retailer, which operates 600 locations, plans to open 37 new stores through the end of the year, on its way to 1,000 stores. Inventory turnover increased by 10 percent in comp stores, which the company attributed to an 8 percent drop in inventory during the first half.
Burlington updated its full-year guidance for sales to the 8.4% to 8.9% range, up from the earlier outlook that had pegged sales at 7.3% to 8.1%. Comp store sales are still expected to increase by 2 to 3 percent.
[Read more about why retailers are chasing off-price these days: Follow the Leader: Off-Price Gets Crowded]
Sales: Burlington reported $1.4 billion in sales for the second quarter, ended July 29. That represents an 8.6% increase over the company’s $1.3 billion in sales during the previous year period. The sales boost was a result of a 3.5% comp store increase and an increase of $70 million from both new and non-comparable stores. This was the retailer’s 18th consecutive quarter of positive comps.
Earnings: Net income increased 130 percent in the quarter to $47 million or 66 cents per diluted share, compared to $20 million or 28 cents during the second quarter of 2016.
“Our overall 8.6% sales growth, along with our 140 basis point adjusted operating margin improvement, enabled the company to drive an 85 percent increase in Adjusted EPS in the second quarter, well ahead of our guidance. Our inventories are fresh, we are well positioned for Back to School, and we have significant open-to-buy entering the third quarter as opportunities remain plentiful,” said CEO Tom Kingsbury.
Abercrombie & Fitch
In a Nutshell: Abercrombie & Fitch, which operates 893 locations, continues to show signs of improvement as the company works to turn the business around. Hollister remains the bright spot, with customers who are engaged with the brand experience. The company continued to shuffle the assortment at its namesake stores, which accounts for 42.7% of sales, and initiate core strategies from Hollister’s success. The retailer’s outlook for the balance of the year puts comp sales flat to up slightly.
Sales: Abercrombie reported total net sales of $779.3 million for the second quarter, ended July 29. That’s compared to $783.2 million in the same period last year. Comp sales decreased 1 percent in the quarter, compared to a 3 percent drop during the same period last year. The results were dragged down by Abercrombie, which dropped 7 percent despite a 5 percent gain for Hollister. In both cases, the numbers have been heading in the right direction for the last four quarters.
Earnings: The company reported a net loss of $15.5 million, or a 23 cent drop in earnings per share, compared to a loss of $13.1 million, or a 19 cent drop in the last year period.
CEO’s Take: “While we expect the environment to remain challenging and promotional in the second half, we expect to see benefits from the continued improvement in product assortment, our strategic investments in marketing and omnichannel, and our ongoing efforts to optimize productivity across all channels. We are confident we are on the right path to deliver enhanced performance and long term shareholder value,” said CEO Fran Horowitz.
In a Nutshell: During its second quarter earnings announcement, Sears Holdings said it plans to close 28 additional Kmart locations this year. Most closures will happen in November and affected employees will receive severance and have the opportunity to apply for other positions in the company.
These closures are on top of the 180 stores Sears Holdings has closed so far this year, and the 150 additional locations slated to go dark by the end of next quarter.
The company has achieved $1 billion toward its cost savings measures this year, on its way to the planned $1.25 billion in 2017. Merchandise inventory is down from $4.7 billion in the same period last year to $3.4 billion this year. Long term debt has been reduced from $4.2 billion in January to $3.5 billion at the end of the quarter. Sears generated $460 million from real estate.
Sales: Merchandise sales dropped to $3.5 billion, for the second quarter, ended July 29, compared to $4.6 billion in the same period of 2016. Comp store sales dropped by 11.5%—with Kmart was down 9.4% and Sears down 13.2%—compared to a 5.2% drop during the previous year period. The decline is attributed to the shuttering of stores, closure of some pharmacies and other services.
Earnings: The company reported an income loss of $251 million dollars, or $2.34 per diluted share, compared to 395 million, or $3.70 per diluted share, in the second quarter of 2016.
CEO’s Take: “We are making progress on the strategic priorities we outlined earlier this year and remain focused on returning our company to profitability. The comprehensive restructuring of our operations is delivering cost efficiencies and helping drive improvements to our operating performance. While the third quarter has historically been our most difficult quarter over the past several years, we are working towards making meaningful improvement in our performance this year as a result of the restructuring actions we have put in place, and our continued focus on the expansion of our Shop Your Way ecosystem,” said Edward Lampert, chairman and CEO of Sears Holdings.
The Nordstrom family, which had begun the process of taking the company private last year, has taken up the effort again and could do so in a month.Read more
Reebok is gearing up for springtime outdoor sports activities by introducing the Fast Flexweave, a running shoe designed for ultracomfort and maximum speed.Read more
Maintaining compliance for apparel, footwear and home textile products could become more seamless with the latest information on restricted chemicals.Read more
Gap CEO Jeff Kirwan is leaving, Clique hired a new executive to head up its business strategy, plus Stella McCartney and Kering decided to end their partnership.Read more
ASOS is doing its part to eradicate modern slavery and shed further light on the issues at hand.Read more
Some of the technologies on the MIT Breakthrough list are now coming into their own, while others are rising in tandem with trends such as cryptocurrency.Read more
Apparel importer SGS Sports, which uses a Canadian company to warehouse goods until a U.S. customer is found, was unable to show sufficient proof of the two companies being separate entities, U.S. Customs & Border Protection ruled.Read more