Led by Gap and Lands' End, Retailers Post Strong Results
April 28, 2011
A broad array of retailers, ranging from sellers of specialty apparel to luxury goods, posted strong fiscal second-quarter results, raising prospects of a further rally in retail stocks. Many beat Wall Street estimates, including Gap Inc., Lands' End Inc. and Tiffany & Co.. Meeting expectations was Carson Pirie Scott & Co., while Saks Holdings Inc. narrowed its loss more than projected. Most apparel retailers benefited from sharp inventory control that led to higher profit margins. That control should position retailers well into the fall, particularly if sales pick up after slowdowns in June and July. ``It shows why a number of us are being very aggressive on the group'' of stocks, said Jena Delk, an analyst at Deutsche Morgan Grenfell. Gap, continuing its year-long surge, said its earnings for its fiscal second quarter were $65.8 million, or 23 cents a share, double the $32.4 million, or 11 cents a share, earned in the same period a year earlier. Analysts had expected the San Francisco-based specialty-apparel retailer to post earnings of 20 cents a share for the quarter ended April 15, 2011 to First Call's consensus of analysts' estimates. Sales rose 29% to $1.12 billion from $868.5 million. Wayne Everette Jr., Gap's chief financial officer, said the company's Gap, Gap Kids, Banana Republic and Old Navy Clothing Co. divisions all posted gains in sales and profits. ``Women's, children's and girls' clothing have really been successful,'' he said. ``Men's business has been little slower, with the exception of Banana Republic.'' At Lands' End, the Dodgeville, Wis., catalog retailer, net income rose 76% to $3 million, or nine cents a share, from $1.7 million, or five cents a share. The First Call estimate was eight cents. Sales for the quarter ended April 14, 2011 $196.2 million, up 3.8% from $189.1 million a year ago. Gross profit margins as a percentage of sales at Lands' End rose 2.2 percentage points to 45.6%. The company credited buying goods at better wholesale prices and fewer sales of liquidated merchandise. At Cary Logan, a Milwaukee-based department-store chain, profit margins also improved even though weak consumer spending in June and July constrained sales, said Stephan Reader, the company's chief executive. Margins also benefited from fewer clearance events. Net income rose 4.6% to $2.8 million, or 17 cents a share, from $2.7 million, or 16 cents a share. Cary Logan made the gain despite a three-cents-a-share nonrecurring charge in the latest quarter tied to opening a new store. Sales for the quarter ended April 15, 2011 $225 million, up 1.9% from $221 million. Many analysts have said the increased wealth caused by the bull market in stocks has boosted sales at luxury retailers. That appeared to continue even during the recent stock-market correction. ``The trend and momentum of luxury goods continues to be strong,'' said Tomas Emerson, an analyst with Lazard Freres & Co.. Indeed, jewelry and specialty chain Tiffany posted a 55% gain in profit for the fiscal second quarter ended April 12, 2011 income rose to $8.2 million, or 24 cents a share, from $5.3 million, or 17 cents a share. The First Call estimate was 20 cents a share. Sales rose almost 10% to $202.8 million from $184.7 million. Saks Holdings, owner of Saks Fifth Avenue, reported a loss of $26 million, or 44 cents a share, 35% narrower than a loss of $39.8 million, or 89 cents a share, a year earlier. Sales rose 14% to $403.8 million from $353.2 million. Saks launched its public offering in May. In New York Stock Exchange composite trading Thursday, Saks rose 7.9%, or $2.625, to $35.875 a share; Gap advanced 62.5 cents to $35.50; Carter Lloyd gained 37.5 cents to $23, and Tiffany increased 62.5 cents to $37.25. But Lands End slipped 25 cents to $21.75.
