Wal-Mart Stores Inc. (Bentonville, Ark.) and The TJX Cos. (Framingham, Mass.) reported strong second quarter earnings increases, buoyed by U.S. consumers'continued bargain-hunting.
Wal-Mart reported a 26 percent rise in profits for the quarter ending July 31, 2002. TJX recorded a 16 percent increase in earnings. Both performances topped analysts'expectations.
Though J.C. Penney Co. Inc. (Plano, Texas) posted a loss and disappointing department store sales, it was a far narrower loss than analysts were expecting. But upscale jewelry retailer Tiffany & Co. (New York), bruised by weak sales both in the U.S. and abroad, recorded a 9 percent decline in profits.
“For the first time in our history, we generated over $2 billion in net income in a non-holiday quarter,” said Wal-Mart ceo Lee Scott. Overall sales in the second quarter gained 13 percent and same-store sales were up 6.4 percent. Sales in the discount store division (Supercenters and grocery stores) were up 14.1 percent for the period. Sam's Clubs sales grew 9.2 percent for the quarter; international sales were up 15.9 percent.
But, citing a slowing in business at the end of the second quarter, the company lowered its forecast for same-store for the third quarter to 4-6 percent. That's down from the previous forecast of a 5-7 percent increase, but that had been upgraded from a 3-5 percent estimate earlier in the year.
“Our track record shows that in softer economic times, we tend to attract new customers as they seek . . . values,” said TJX president and ceo Edmond English. TJX Cos. operates 701 T.J. Maxx stores, 600 Marshall units, 132 HomeGoods and 56 A.J. Wright stores in the United States. In Canada, the company operates 137 Winners and 11 HomeSense stores. And its European division, T.K. Maxx, operates 113 stores.
Penney's showed a slight decrease in overall sales and a 2.4 percent same-store sales decrease in department stores. Chairman and ceo Allen Questrom said that despite weaker-than-expected department store sales, gross margin is benefiting from a more centralized buying process, in which buyers bought merchandise for their own stores.
Despite its weak quarter, Tiffany said it is not changing its earnings outlook, and maintains that profits should be in the range of 18 cents to 20 cents in the third quarter, and 64 cents to 67 cents in the fourth quarter. U.S. retail sales rose 1 percent in the second quarter; same-store sales dropped 2 percent. The New York flagship store posted a 6 percent decline. International retail sales slipped 1 percent. In Japan, same-store sales were down 13 percent in the second quarter.