Kohl's Lowers Outlook As E-comm Advances

October 29, 2014

Weaker than expected third quarter sales prompted Kohl's to lower its profit forecast while noting that e-commerce sales increased 30%.

The company held an investor conference on October 29 and said third quarter sales were expected to decline 1.4% due to softer than expected sales during October.  The top line weakness caused the company to confirm that profits would be at the lower end of a previously forecast range of $4.05 to $4.45 a share.

While the overall forecast for the third quarter is for a decline, the company expects the children's category to report comparable sales increases for the quarter.  Accessories, footwear and men's are expected to report lower sales, but to outperform the company average.  Meanwhile, home and women's are expected to underperform the company average.

Kohl's currently operates 1,163 stores in 49 states.

Source: Retailing Today

Price Investments Hinder Supervalu Profits

October 16, 2014

Supervalu president and CEO Sam Duncan is encouraged with the progress the retailer is making and why not.  Identical store sales in the company's Save-A-Lot units were up 6.5% in the second quarter.

The company's total sales for the period ended September 6, increased 1.8% to $4.02 billion while profits declined to $31 million, or 11 cents a share, from $40 million, or 15 cents a share.  When adjusted for some non-recurring items, second quarter earnings were $34 million, or 13 cents a share.

"Midway through fiscal 2015, I am encouraged with the progress we have made across the business," said president and CEO Sam Duncan.  "The investments we have made at Save-A-Lot continue to drive sales and our retail food stores recorded their third consecutive quarter of positive identical store sales.  The addition of the Rainbow stores this past quarter is a positive for our independent business and we are encouraged by the early results."

Identical store sales in the Save-A-Lot Network increased 6.5% while identical store sales in the company's retail food segment increased 0.4%.

In Supervalu's largest segment, the independent business unit, sales were down slightly to $1.82 billion from $1.84 billion primarily due to lost accounts.  The company said it lost one new Albertson's banner that completed the transition to self-distribution, a larger lost customer and lower military sales, partially offset by new business including increased sales to existing customers.

Second quarter Save-A-Lot net sales increased 8% to $1.05 billion, but operating profits fell to $26 million from $32 million the prior year due to investments in price.

Source: Retailing Today

Walmart Slows Physical Expansion In U.S.

October 15, 2014

A much anticipated acceleration of small format Walmart stores failed to materialize on Wednesday when the retailer announced plans to curtail domestic new store growth in 2016.

Walmart said it would open between 200 and 220 Neighborhood Market stores and 60 to 70 supercenters next year.  Both figures are below the company's projections for current year openings.  Walmart said it will end its current fiscal year with 240 Neighborhood Market stores, below the range of 270 to 300 openings that had been forecast earlier in the year.  The number of supercenters that will open this year is expected to be 120 units, slightly higher than the projection shared at the beginning of the year.

As a result, Walmart said its capital expenditures in the U.S. would range between $6.1 billion and $6.6 billion compared to $6.6 to $6.9 billion during the current year.  Total capital expenditures, including international operations, Sam's Club and e-commerce, in 2015 are expected to range from $11.6 billion to $12.9 billion, below the $12.5 billion to $13 billion the company expects to spend this year which is below the $13.1 billion spent in 2013.

"We know that our supercenters are an important format for the stock-up trip, but we want to be thoughtful about our investment, ensuring that we align the space to evolving customer needs," said Walmart U.S. president and CEO Greg Foran.  "To do this, we will moderate supercenter growth in fiscal 2016.  Our investment in Neighborhood Markets will go forward because they continue to show strong results across the box and they provide our customers with convenient access to grocery, pharmacy services, and other quick-trip needs."

The reduced pace of supercenter expansion isn't surprising as Walmart currently operates 3,375 of the large stores, but Neighborhood Market is a different story.  Walmart currently operates 428 Neighborhood Market stores and in prior meetings with analysts and during quarterly earnings calls the company has raved about the strong mid-single digit same store sales performance of the small format food and drug stores.  In recent weeks, the company also implemented a new organizational structure which appeared to foretell of greater things to come for a concept said to be gaining share.

Offsetting the reduced pace of physical expansion, Walmart said it was increasing investment in e-commerce to a range of $1.2 billion to $1.5 billion, ahead of current year spending of roughly $1 billion and well ahead of the $400 million spent in 2013.  Those investments will enable the company to build one million square foot online fulfillment centers in Georgia and Pennsylvania and new facilities in Brazil and China.

The increased e-commerce spending comes as Walmart failed to realize current year online sales targets.  The company said current year e-commerce sales will total roughly $12.5 billion, roughly $500 million less than guidance for e-commerce sales of $13 billion shared last year at this time.

Overall, Walmart presented a fairly bleak outlook at its 21st annual fall investor conference which explained why the company's shares tumbled $2.78 on Wednesday.  In addition to the reduced physical expansion and less than expected online sales, the company said it is operating in a tougher sales environment than it anticipated a year ago.  Consequently, sales for the current fiscal year are expected to increase between 2% to 3% on top of last year's sales of $473.1 billion.

The rate of sales growth in 2015 has the potential to improve slightly, based on guidance the company provided at its meeting.  Sales are forecast to increase between 2% and 4% next year resulting in the addition of between $10 billion and $20 billion in sales volume.  However, at that rate of growth profits will come under pressure as Walmart said its operating expenses are expected to grow at a somewhat faster rate which in turn will cause operating income to be flat to slightly down in 2015.

Despite a number of worrisome disclosures at the meeting, Wal-Mart Stores, Inc., president and CEO Doug McMillon sought to reassure members of the financial community that the company's prospects are bright.

"This is an exciting time for Walmart, as there are so many new ways to serve customers.  Exceeding customer expectations has always been our goal, and we have short and long-term opportunities to do that even better," McMillon said.  "We'll change the mix of our capital spend next year to provide greater access, while continuing to focus on price leadership, service, and a broad assortment.  We'll give customers the choices they want and need in ways that only Walmart can."

Source: Retailing Today

Fred's September Sales Promise Restored Growth Ahead

October 9, 2014

Fred's CEO Bruce A Efird is confident about the company's initiatives to reposition the convenience-center model, expand marketing and implement new technology - all factors that he expects will help restore growth in the fourth quarter and next year.

Efird added that the initiatives are already producing positive results, despite customer traffic remaining a challenge in the company's markets.

Total sales for September increased 3.3% to $183.6 million from $177.8 million in September 2013.  Comparable store sales for the month increased 0.2% on top of an increase of 2.8% in the same period last year.  General merchandise inventory has been significantly lowered, Efird said, and the company's clearance programs to address unproductive inventory, once again, exceeded the sales plan for September.

Fred's total sales for the year-to-date period increased 1.5% to $1.32 billion from $1.30 billion for the same period last year.  On a comparable store basis, year-to-date sales decreased 0.5% versus an increase of 0.8% for the year-earlier period.

"Our September comparable store sales continued the positive trend we have experienced in recent months in spite of the strong sales performance posted in the same month last year.  Our initiatives to emphasize our convenience-center model continue to gain traction throughout the business," Efird added.  Additionally, our pharmacy department performed well with increases in both comparable scripts and sales.  We are very excited to have our new pharmacy prime vendor agreement in place, which will not only accelerate gross margin improvement in the pharmacy department, but will also support our pharmacy expansion initiatives."

During the month, Fred's closed five full service stores and one Xpress location.  Fred's operates 701 discount general merchandise stores, including 21 franchised Fred's stores, in the southeastern United States.

Source: Retailing Today

Decreased Customer Traffic Affects Family Dollar's Q4

October 9, 2014

Family Dollar's fourth quarter results were affected by decreased customer traffic, prompting chairman and CEO Howard R. Levine to point out that the company is still in the early stages of its turnaround plan.

Levine expects that the strategic actions taken in fiscal 2014 will position the company for better sales and earnings performance in fiscal 2015.  Although he anticipates that the first quarter will be the most challenging of fiscal 2015, Levine is optimistic that momentum will build through the rest of the year.  But he stopped short of giving specific details regarding financial guidance for 2015 in light of the company's pending merger with Dollar Tree.

Total net sales for the quarter increased 4.5% to $2.61 billion from $2.5 billion in the prior-year quarter.  Comparable store sales increased 0.3% as a result of an increase in the average customer transaction value, partially offset by fewer customer transactions.  Sales in the fourth quarter of fiscal 2014 were strongest in the consumables and seasonal and electronics categories.

Gross profit for the quarter was $861.3 million or 32.9% of net sales.  During the quarter, the company implemented a series of restructuring initiatives, including the closing of 375 underperforming stores.  As a result, the company incurred $10.4 million in inventory write-downs in an effort to sell through merchandise at stores scheduled to close.

Net income in the quarter was $34.5 million compared with $102.2 million in the fourth quarter last year.  Adjusted to exclued the inventory write-downs, restructuring charges and merger fees in the quarter, and the favorable accounting adjustment in the quarter, net income for the quarter was $83.9 million, compared to adjusted net income of $99 million in the fourth quarter last year.

"Although our fourth quarter results continue to reflect the difficult competitive environment, as well as the financial challenges facing our customers, we are continuing to execute our previously announced restructuring initiatives to improve our performance," added Levine.

Source: Retailing Today

Costco Sales Rise In Fourth Quarter

October 8, 2014

Costco reported a rise in sales and same-store sales for the fourth quarter.

Net sales for the quarter were $34.75 billion, an increase of 9% from $31.77 billion in fiscal 2013.  Same-store sales for the total company increased 6%, while U.S. same-store sales also rose 6%.

Net income for the quarter was $697 million, or $1.58 per diluted share, compared with $617 million, or $1.40 per diluted share, in the year-ago period.

Fiscal year 2014 sales totaled $110.21 billion, an increase of 7%.  Same-store sales increased 4% for the company and 5% in the United States.

Net income for the fiscal year was $2.06 billion, or $4.65 per diluted share, compared with $2.04 billion, or $4.63 per diluted share, in fiscal year 2013.  Net income last year was positively impacted by a $62 million tax benefit in connection with the portion of the special cash dividend paid in December 2012 to the company 401(k) plan participants.

Source: Retailing Today

Rite Aid Sales Climb In September

October 2, 2014

Rite Aid reported $2 billion in sales for the four weeks ended September 27, representing a 4.5% increase over the comparable yer-ago period.

Same-store sales increased 5.1% over the prior-year period, including a 2.3% lift in front-end same-store sales and growth of 6.3% in pharmacy and comparable sales.  Pharmacy same-store  sales included an approximate 225 basis points negative impact from new generic introductions.  Prescription count at comparable stores increased 4.4% over the prior-year period.

Prescription sales accounted for 69.5% of drug store sales, and third party prescription sales represented 97.6% of pharmacy sales.

Year-to-date, same-store sales for the 30 week period ended September 27 increased 3.8% over the prior-year period.  Front-end same-store sales increased 0.8% while pharmacy same-store sales increased 5.2%.  Prescription count at comparable stores increased 3.2% over the prior-year period.

Total drug store sales for the 30 weeks ended September 27 increased 3.3% with sales of $14.9 billion.  Prescription sales represented 68.7% of total drug store sales.

Source: Retailing Today

Walgreens Reports Lift In Annual Sales

September 30, 2014

Walgreens posted fourth quarter sales of $19.1 billion, representing an increase of 6.2% compared to the year-ago period, while sales for the fiscal 2014 ended August 31 increased 5.8% to a record $76.4 billion.

Front-end comparable store sales increased 1.3% in the fourth quarter compared with last year's fourth quarter.  Customer traffic in comparable stores decreased 2.2% and basket size increased 3.5%, while total sales in comparable stores increased 5.4%.  Walgreens Balance Rewards loyalty program reached 82 million active members at the end of this year's fourth quarter.

Prescription sales, which accounted for 65.7% of sales in the quarter, increased 9.3% compared with last year's quarter, while prescription sales in comparable stores increased 7.8%.  The company filled 211 million prescriptions in the quarter, an increase of 4.2% over last year's fourth quarter.  Prescriptions filled in comparable stores increased 3.9% in the quarter.

In fiscal 2014, Walgreens filled a record 856 million prescriptions.  The company continued to see strong growth in prescriptions filled for Medicare Part D patients, which increased 9.2% in the fourth quarter compared with last year's quarter.  Since the beginning of fiscal 2013, Walgreens Medicare Part D prescription market share has grown more than twice as fast as its overall retail prescription market share, the company stated.

"Our fourth quarter performance was in line with our expectation, recognizing we have much more to do.  We closed the fiscal year by exercising the option for the second step of our strategic transaction with Alliance Boots, completing the transition of our pharmaceutical distribution to AmerisourceBergen and driving continued improvement in our daily living business that resulted in our largest year-over-year quarterly and fiscal-year sales increases in three years," stated Walgreens president and CEO Greg Wasson.  "While continuing to work through pharmacy margin pressure, we were able to achieve improved top-line pharmacy growth as our retail pharmacy market share for the fiscal year increased 30 basis points to 19%.  Finally, we maintained solid expense control in the fourth quarter and are moving forward with the implementation of our previously announced cost-reduction initiative to achieve $1 billion in savings by the end of fiscal 2017."

Walgreens realized a net loss determined in accordance with generally accepted accounting principles for the fiscal 2014 fourth quarter of $239 million, compared with net earnings of $657 million in the same quarter a year ago.  Net loss per share for the quarter was 25 cents, compared with earnings of 69 cents per diluted share in the year-ago quarter.  This year's quarter was negatively impacted by an $866 million, or 90 cents per diluted share, non-cash loss on the amendment and exercise during the quarter of the company's Alliance Boots call option.

Adjusted fiscal 2014 fourth quarter net earnings were $714 million, a 1.7% increase.  Adjusted net earnings per diluted share for the quarter increased 1.4% to 74 cents, compared with 73 cents per diluted share in the year-ago quarter.  This year's fourth quarter earnings adjustments had a net positive impact of $953 million or 99 cents per diluted share.

The combined synergies for Walgreens and its strategic partner, Alliance Boots, in fiscal 2014 were $491 million.  The joint synergy program is estimated to deliver fiscal 2015 combined synergies of approximately $650 million.  Alliance Boots contributed 6 cents per diluted share to Walgreens fourth quarter 2014 adjusted net earnings.  The company estimates that the accretion from Alliance Boots in the first quarter of fiscal 2015 will be an adjusted 10 to 11 cents per diluted share, including a 2-cent benefit related to Alliance Boots' acquisition of its partner's interest in a joint venture.  This estimate does not include amortization expense, the impact of AmerisourceBergen warrants or one-time transaction costs.

During fiscal 2014, the company generated operating cash flow of $3.9 billion and free cash flow of $2.8 billion.  Walgreens also increased its quarterly dividend rate declared in August by 7.1% to 33.75 cents per share, consistent with the company's goal of returning cash to shareholders.  This marked the 39th consecutive year in which Walgreens increased its shareholder dividend.

GAAP total gross profit dollars increased $136 million, or 2.6%, compared with the year-ago fourth quarter, with gross profit margins decreasing 90 basis points versus the year-ago quarter to 28 as a percentage of sales.  Adjusted gross profit dollars increased $133 million, or 2.6%, compared with the year-ago fourth quarter.

Pharmacy gross profit dollars were negatively impacted by lower third-party reimbursement and generic drug price inflation, which were partially offset by an increase in the brand-to-generic drug conversions compared with the year-ago quarter.  Both pharmacy and front-end margins benefitted from purchasing synergies from the company's joint venture with Alliance Boots.

The company opened or acquired 46 new drug stores in the fourth quarter compared with 33 in the year-ago quarter.  In fiscal 2014, Walgreens added a net gain of 21 new drug stores in addition to 70 net new drug stores through acquisitions.

At August 31, Walgreens operated 8,309 locations with a presence in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.  The company has 8,207 drug stores nationwide, a net gain of 91 compared with a year ago.  Walgreens also operates infusion and respiratory services facilities, specialty pharmacies and mail service facilities, and manages more than 400 Healthcare Clinic and provider practice locations around the country.  Walgreens digital Business includes Walgreens.com, drugstore.com, Beauty.com, SkinStore.com and VisionDirect.com

Source: Retailing Today 

Ascena Retail Banks On Omnichannel Following 'Mixed' Q4 Results

September 23, 2014

Following fourth quarter results that missed Wall Street expectations, Ascena Retail is looking ahead to fiscal 2015, which CEO David Jaffe said will see the continuation of a critical, multi-year investment to build the company's omnichannel platform.

The company reported net earnings of $15.7 million, compared with $29.8 million in the year-ago period.

Revenues for the quarter were $1.18 billion, compared with $1.20 billion in the prior year.  The company attributed the decrease challenging tween market comditions at Justice and inventory-related issues at Lane Bryant.  Results were partially offset by positive comp growth at Maurices and Catherines and new strong growth at Maurices.  Total same-store sales decreased by 2%.

"Despite mixed results across our portfolio and continuing soft traffic patterns, fourth quarter EPS was in line with our expectations.  We have yet to see sustained evidence of market improvement, and as a result, are maintaining focus on inventory levels and expense management, developing an integrated ecommerce platform for our customers, and driving efficiency improvements throgh our strategic investments.  Our final brand is in the process of moving into our retail distribution center in Ohio, and we remain on track to have all our brands operating out of our new ecommerce fulfillment center by spring of calendar 2015.  We continue to create a business model that will drive sustainable long term value for shareholders."

Source: Retailing Today

Home Depot Updates Guidance

September 19, 2014

Investors don't seem to care that Home Depot's data breach is being characterized as the largest ever in the retail sector with shares of the company hitting a new high on Friday.

Home Depot shares touched a 52-week high of $93.75 on Friday, a day after the company disclosed details about an extensive data breach which went undetected for months and compromised the information of 56 million customers.

The company confirmed that the malware used in its recent breach has been eliminated from its U.S. and Canadian networks and provided new details about the completion of a major payment security project designed to increase data security.  The project provides enhanced encryption of payment data at the point of sale in the company's U.S. stores, offering significant new protection for customers, the company said.  Roll-out of enhanced encryption to Canadian stores will be complete by early 2015.  Canadian stores are already enabled with EMV or "Chip and PIN" technology.

Despite the expense of the IT investigation and remediation efforts, the strength of Home Depot's business during the period when hackers were stealing customers' data enabled it to increase its full year profit forecast by two cents to $4.54.  While the updated guidance includes various expenses already incurred, it does not reflect potentially substantial accruals for future losses the company said are probably but cannot be quantified at this time.

Source: Retailing Today

Rite Aid Revises Guidance In Second Quarter

September 18, 2014

Solid same store sales growth at Rite Aid caused second quarter profits to surge but looming pressure on pharmacy margins prompted the company to reduce its full year outlook.

Rite Aid reported revenues of $6.5 billion for its second quarter ended August 30, representing a 3.9% lift credited to rising pharmacy same-store sales.  Rite Aid revised its year-end guidance, however, based on anticipated lower pharmacy margins going forward.

"In the second quarter, our team of dedicated Rite Aid associates worked together to execute our strategy and deliver results that reflect growth in net income and adjusted EBITDA and significant increases in same-store sales and prescription count," stated Rite Aid chairman and CEO John Standley.  "Heading forward, while we believe that our key initiatives will continue to drive top-line growth, we are revising our guidance based on lower than anticipated pharmacy margin in the second half of fiscal 2015.  As we navigate these headwinds, we will remain focused on growing our business, generating continued operational efficiencies and positioning our associates to deliver a consistently outstanding experience for our customers."

Same-store sales for the quarter increased 4.1% over the prior year, consisting of a 1.1% increase in front-end sales and a 5.6% increase in pharmacy sales.  Pharmacy sales included an approximate 199 basis point negative impact from new generic introductions.  The number of prescriptions filled in same stores increased 3.7% over the prior year period.

Prescription sales accounted for 68.8% of total drug store sales, and third-party prescription revenue was 97.5% of pharmacy sales.

Net income was $127.8 million or $0.13 per diluted share compared to last year's second quarter net income of $32.8 million or $0.03 per diluted share.  The improvement in net income resulted primarily from an increase in adjusted EBITDA, a lower LIFO charge due to pharmacy inventory reductions and a $62.2 million loss on debt retirement in the prior year, partially offset by higher income tax expense.

Adjusted EBITDA was $364.2 million or 5.6% for the second quarter compared to $341.6 million or 5.4% of revenues for the like period last year.  Adjusted EBITDA improved due to an increase in front-end and pharmacy gross profit, partially offset by an increase in selling, general and administrative expenses related to the company's higher level of sales.

The improved pharmacy gross profit was driven by the increase in pharmacy revenues and the impact on inventory valuation related to the company's transition to its new drug purchasing and delivery arrangement with McKeeson, partially offset by lower reimbursement rates.  The net effect on inventory valuation resulting from the transition to the outsourced McKesson arrangement is not expected to be material to fiscal 2015 results, but did increase gross profit, adjusted EBITDA and pre-tax income by approximately $40 million in the second quarter.

In the second quarter, the company relocated 5 stores, remodeled 117 stores and expanded 1 store, bringing the total number of wellness stores chainwide to 1,433.  The company also opened 1 store and closed 10 stores, resulting in a total store count of 4,572 at the end of the second quarter.

Based upon current estimates for reimbursement rates and anticipated lower profitability from new generics and generic drugs that recently lost exclusivity, the company is expecting decreases in pharmacy margin in the second half of fiscal 2015 as compared to its prior estimates and therefore is lowering its guidance for adjusted EBITDA, net income and net income per diluted share.  Adjusted EBITDA is expected to be between $1.2 billion and $1.275 billion.  Net income is expected to be between $223 million and $333 million and income per diluted share between $0.22 and $0.33.  The company is also narrowing guidance for sales and same-store sales.  Sales are expected to be between $26 billion and $26.3 billion and same-store sales to range from an increase of 3% to an increase of 4% over Fiscal 2014.  Capital expenditures are expected to be approximately $525 million.

Source: Retailing Today

Thanks To Saks, HBC's Sales & Profit Soar In Q2

September 12, 2014

Hudson's Bay Company is reaping the rewards of its acquisition last year of Saks.  The company's retail sales soared 86.6% to $1.8 billion, from $948 million in the prior year.

Consolidated same-store sales increased by 1.9% on a local currency basis, with increases of 1.1% at HBC's department store group (DSG), 2.2% at Saks Fifth Avenue and 14.9% at Off 5th.  Digital commerce sales totaled $162 million, including $116 million from Saks and growth of 82.2% at DSG.

In terms of merchandise category performance, sales growth at DSG was driven by men's apparel, home and cosmetics.  Sales growth at Saks Fifth Avenue was led by menswear, gifts and accessories.  Sales growth at Off 5th was strong across the majority of categories.

Gross profit jumped to $700 million, from $368 million in the prior year, again primarily attributable to the inclusion of Saks.

"HBC's quarter was characterized by strong performance from the higher end of our businesses, demonstrating the sustained strength of affluent consumers, and softer performance from our more moderate businesses.  Off 5th, buoyed by its new digital business, experienced outsized same store sales growth for the quarter," said Richard Baker, HBC's governor and CEO.  "We continued to invest in HBC Digital, where we witnessed tremendous sales growth.  Based upon our results for the first half of the year and our positioning for the back-to-school and holiday quarters, we are affirming our outlook for full-year fiscal 2014."

During the second quarter, HBC began the integration of the Home Outfitters business with the Home business of the Hudson's Bay banner.

"Joining our two Home businesses not only allows us to create a more powerful Home destination, but also drives efficiency by combining our merchandising and marketing efforts and organizations," said Donald Watros, HBC's president.

HBC is currently in the process of assessing its Home Outfitters locations and previously announced the closing of locations in Mississauga, Ontario, and Abbotsford, British Columbia, in December 2014 and January 2015, respectively.  Beginning with this year's third quarter results, Home Outfitters will be included in HBC's department store segment.

During the quarter, the company opened four new Off 5th stores located in Boston, Massachusetts; San Diego, California; Charlotte, North Carolina and Lousiville, Kentucky.  During the third quarter, HBC expects to open a Lord & Taylor store in Albany, New York, Off 5th stores in Eagan, Minnesota; Costa Mesa, California; and Columbus, Ohio and a Hudson's Bay Outlet in Mirabel, Quebec.

HBC also recently announced the planned opening of a Saks Fifth Avenue store in the fall of 2016 at Brickell City Centre in downtown Miami, Florida.  Previously, the company has announced plans for Saks Fifth Avenue stores in San Jual, Puerto Rico, in the spring of next year and in Honolulu, Hawaii, in the spring of 2016.

Looking ahead to the full fiscal year, the company anticipates total sales ranging from $7.8 billion to $8.1 billion.  This implies low-to-mid single-digit consolidated same store sales growth calculated on a local currency basis, driven in part by strong digital sales growth.

As previously announced, Paul Beesley joined the company during the second quarter as CFO.  Subsequent to the second quarter, John Caplice joined HBC as SVP, treasury and investor relations, a week ago.  Caplice most recently served as SVP, treasurer and investor relations, at Shoppers Drug Mart Corporation, Canada's largest retail drug store chain with annual sales in excess of $11 billion, from 2000 to 2014.

Source: Retailing Today 

Kroger Raises Full-Year Guidance

September 11, 2014

Kroger reported total sales of $25.3 billion, representing an increase of 11.6% for its second quarter.  Total sales, excluding fuel, increased 12.4% in the second quarter over the same period last year.

"We are winning with customers because we offer a full range of advantages including a great overall shopping experience, excellent customer service, a complete assortment of both national and corporate brand products and everyday low prices and promotional offerings," stated Rodney McMullen, Kroger CEO.  "As we improve our connection with customers, we are also executing our growth plan and delivering on our key performance indicators - all of which is fueling strong financial results for shareholders."

Net earnings totaled $347 million, or $0.70 per diluted share, and identical supermarket sales growth, without fuel, was 4.8% in the second quarter of fiscal year 2014, marking the 43rd consecutive quarter of positive identical supermarket sales growth.

Net earnings in the same period last year were $317 million, or $0.60 per diluted share.

Based on the second quarter results, the company raised and narrowed its adjusted net earnings per diluted share guidance to a range of $3.22 to $3.28 for fiscal 2014.  The previous guidance was $3.19 to $3.27 per diluted share.  Kroger raised its identical supermarket sales growth guidance, excluding fuel, to 3.5% to 4.3% for fiscal 2014.  The previous guidance was 3% to 4%.

This is the second consecutive quarter that includes Harris Teeter in Kroger's statement of operations.  Year-over-year percentage comparisons are affected as a result.

Source: Retailing Today

Costco To Open Nine Stores By End Of 2014

September 4, 2014

Costco said it plans to open nine new warehouse stores before the end of calendar year 2014, following a boost in net sales for August and the fourth quarter.

During the month of August, net sales were $8.8 billion, an increase of 10% from $8 billion during the similar period last year.  Same-store sales in the United States increased 7%.

For the 16 week fourth quarter, the company reported net sales of $34.8 billion, an increase of 9% from $31.8 billion in the year-ago period.  Same-store sales in the United States increased 6%.

For the 52 week fiscal year ended August 31, Costco reported net sales of $110.2 billion, an increase of 7% compared with the year-ago period.  U.S. same-store sales rose 5%.

Source: Retailing Today

Rite Aid Sees Lift In August Sales

September 4, 2014

Rite Aid reported a 3.2% lift in sales for the 26 weeks ended August 30, ringing in $12.9 billion.

Same-store sales for the period increased 3.6% over the prior-year period.  Front-end same store sales increased 0.6%, while pharmacy same store sales increased 5.1%.  Prescription count at comparable stores increased 3% over the prior-year period.

Prescription sales represented 68.6% of total drug store sales for the 26 week period, and third party prescription sales represented 97.5% of pharmacy sales.

Same-store sales for the 13 week period ended August 30 increased 4.1% over the prior-year period.  Front-end same store sales increased 1.1% while pharmacy same store sales increased 5.6%.  Prescription count at comparable stores increased 3.7% over the prior-year period.

Total drug store sales for the 13 week period increased 3.7% with sales of $6.5 billion.  Prescription sales represented 68.8% of total drug store sales.

Rite Aid posted sales of $2.5 billion for the five weeks ended August 30, representing a 3.7% lift.  Same-store sales increased 3.9% over the prior-year period.  August front-end same-store sales increased 1.1%.  Pharmacy comparable sales, which included an approximate 219 basis points negative impact from new generic introductions, increased 5.2%.  Prescription count at comparable stores increased 3.7% over the prior-year period.

Prescription sales accounted for 69.3% of drug store sales.

Source: Retailing Today 

Fred's Sees Improvements In August

September 4, 2014

Just two days after reporting second quarter results, Fred's posted August results.  Improved sales and traffic in the month were driven, according to CEO Bruce A. Efird, by initiatives that the company implemented for the first time in August.

Total sales for the month increased 6% to $147.6 million from $139.4 million in August 2013.  Comparable store sales for the month increased 2.3% compared with flat store sales in the same period last year.

"We saw ongoing improvements in virtually all general merchandise departments during August, and our pharmacy department continued to post strong growth in comparable scripts and sales," said Efird.  "Going forward in the third quarter, we will continue to transform Fred's based on the convenience/pharmacy-centric model we recently outlined, a strategy that brings clear advantages to our store operations and customers."

During the month, Fred's opened three Xpress pharmacy locations.

Fred's operates 707 discount general merchandise stores, including 21 franchised Fred's stores, in the southeastern United States.

Source: Retailing Today

Walgreens Looks Good In August

September 4, 2014

Walgreens reported August sales of $6.4 billion, an increase of 3.6% from the same month in fiscal 2013.  Total sales for fiscal 2014 were $76.4 billion, an increase of 5.8% from fiscal 2013.

Total front-end sales increased 2.1% in August compared with the same month in fiscal 2013, while comparable-store front-end sales increased 1.4%.  Customer traffic in comparable stores decreased 1.7% while basket size increased 3.1%.

Prescriptions filled at comparable stores increased by 1.1% in August and increased 3.2% on a calendar day-shift adjusted basis.  August 2014 had one additional Sunday and one fewer Thursday compared with August 2013.  These calendar shifts negatively impacted prescriptions filled at comparable stores by 210 basis points.

August pharmacy sales increased by 5.4%.  Comparable-store pharmacy sales increased 5% and increased by a calendar day-shift adjusted 7.1%.  Calendar day-shift adjusted comparable-store pharmacy sales were negatively impacted by 180 basis points due to generic drug introductions in the last 12 months.  Pharmacy sales accounted for 65.7% of total sales for the month.

Sales in comparable stores increased by 3.7% in August.  Calendar day shifts negatively impacted total comparable sales by 140 basis points.  Generic drug introductions in the last 12 months negatively impacted total comparable sales by 120 basis points.

Total sales for fourth quarter 2014, which ended August 31, were 19.1 billion, up 6.2%.  Comparable store sales for the fourth quarter of fiscal 2014 increased 5.6%, while front-end comparable store sales for the quarter increased 1.3%.  Prescriptions filled at comparable stores increased 3.9% in the fourth quarter and comparable pharmacy sales increased 8.2%.

Calendar 2014 year-to-date sales for the first eight months were $50.9 billion, an increase of 5.7% from $48.2 billion in 2013.

Walgreens stated on its August 6, 2014 conference call with analysts that in the fourth quarter, it expected gross profit margin to be down a similar percentage year-over-year to what was experienced in the third quarter.  This is due to ongoing gross profit margin pressures, including recent changes in the environment of the company's pharmacy business including ongoing generic drug inflation, reimbursement pressure and a shift in pharmacy mix toward 90-day prescription refills at retail locations and Medicare Part D.  The company also pointed out that last year's fourth quarter included net gains from certain litigation matters, which reduced selling, general and administrative expenses by just under 1 percentage point.

Walgreens opened 23 stores during August, including four relocations, and closed five.  On August 31, Walgreens operated 8,309 locations in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.  That includes 8,206 drug stores, 91 more than a year ago, including 70 net stores acquired over the last 12 months.  The company also operates infusion and respiratory services facilities, specialty pharmacies and mail service facilities.  Its Take Care Health Systems subsidiary manages more than 400 in-store convenient care clinics.

Source: Retailing Today

Fred's CEO Focuses On Key Wins In Q2

September 2, 2014

Fred's second quarter results reflected the company's strategic decision to build its business model for the future as a convenience/pharmacy-centric store, driven by data-based inventory management, according to CEO Bruce Efird.

The company reported a net loss of $16.4 million for the quarter.  Fred's total sales for the second quarter of fiscal 2014 increased 2% to $491.2 million.  On a comparable-store basis, second quarter sales decreased 0.1%.

The dynamic challenges the company faced surfaced in fourth quarter 2013 throughout its general merchandise and pharmacy departments.  Customer trips came under pressure from what Efird referred to as "Internet intrusion," while generic drug price inflation ramped up faster than the company's payer increases were occurring.  Although its second quarter results were disappointing, Efird pointed to several key wins.

"We saw improvement in general merchandise sales and customer traffic from our new marketing program, which indicates positive traction for the future," he said.  "In pharmacy, we completed the prime vendor agreement that has substantial benefits to all aspects of our pharmacy operations and our specialty division, with components needed to support our accelerated investment in pharmacy acquisitions."

In January, the company took a look at its processes and concluded that retail would not continue with business as usual and changes would have to take place.

"From this thinking came key changes that will drive the transformation of the stores to a convenience/pharmacy-centric store, which began in the second quarter," Efird explained.

Those changes included an acceleration of pharmacy acquisitions that will help Fred's achieve a target of reaching a 65% to 70% penetration rate of stores with a pharmacy.  Fred's derived 40.4% of its sales from pharmaceuticals in the second quarter, compared with 36.4% for the same period a year ago.

Changes also included a new marketing plan, directed at driving customer traffic through multiple avenues, including expanded ad circulars and in-store programs.

The company has been using data-driven inventory and category-management tools and metrics, as well as processing changes to distribution and store procedures to get inventory directly from the truck to the store floor in the same day.  It also plans on closing 60 stores that do not fit the thresholds of the convenience/pharmacy-centric store model, allowing a reallocation of capital.

Fred's also expanded its leadership.  It named Jerry Colley as EVP Store Operations; Ken Donahue as SVP and Chief Information Officer; Craig Barnes as SVP Global Sourcing and Hardlines Merchandising responsibility; and Kelly Ma as VP International and Domestic Sourcing.

Source: Retailing Today 

Big Lots To Live Down Closeout Image

August 31, 2014

Improved merchandising strategies and marketing execution at Big Lots has president and CEO David Campisi feeling good about prospects for a company that continues to distance itself from its closeout roots.

Big Lots produced a 1.7% same store sales increase during its second quarter ended August 2 and generated earnings per share of 31 cents, a penny higher than the company's forecast range of 24 cents to 30 cents.  Total sales increased 1.2% to $1.2 billion.  Profits from continuing operations declined to $17.2 million from $21.5 million and earnings per share of 31 cents were also below the prior year's 37 cents.  Profits suffered as expenses increased 34.5% of second quarter sales compared to 33.9% in the second quarter the prior year.  Gross margins were flat at 39.3%.  Inventories at U.S. stores declined by 6%.

The top line performance was modest and the better than expected profits were below the prior year, but Campisi said he was very pleased with the results with five of the company's seven merchandise categories posting positive comps.

"For the second consecutive quarter, our comps were positive and comfortable within the guidance range we provided, and our earnings were above the high end of our range.  We believe this is an indication that our core customer is responding to our improved merchandising strategies and marketing execution."

Those strategies include a shift toward cleaner, more orderly merchandised stores with a reliably available assortment of products in categories such as food and consumables where leading national brands are available.  The company expects to have freezers and coolers in roughly half of its stores by the holidays and is also enjoying success with the furniture category where it offers financing.

It's all part of an effort to distance itself from the negative image the company had created for itself as a retailer who sold closeout merchandise in cluttered stores.  In fact, in a subtle shift evident in the second quarter, Big Lots now describes its 1,495 store operation as a "unique, non-traditional, discount retailer," whereas it had previously characterized itself as "America's largest broadline closeout retailer."

The result of the changes is more suppliers of branded merchandise are interested in doing business with the company and tapping into the growth potential of its nearly 1,500 stores.  According to CFO Tim Johnson, the company has streamlined its supplier base and is attracting more interest from major suppliers who are no longer embarrassed to see their products in Big Lots stores.

Source: Retailing Today

Walmart's Not So Solid Second Quarter

August 14, 2014

Walmart met low second quarter sales and profit expectations it set for itself, but significantly lowered its full year outlook due to a tepid third quarter sales forecast and increased e-commerce and health care costs.

Total company sales increased 2.8% to $119.3 billion while same store sales at U.S. stores and Sam's Clubs were flat during the period ended July 31.  The total sales figure included a $696 negative impact related to foreign currency translation, without which sales would have increased 3.4% to $120 billion.  Net income increased 0.6% to $4.093 billion from $4.069 billion, but earnings per share declined to $1.21 from $.123.  Walmart had forecast earnings in a range of $1.15 to $1.25 and analysts' consensus estimate was $1.21.

Despite the decline from the prior year, Wal-Mart Stores, Inc., president and CEO Doug McMillon said he was pleased with the earnings per share performance.

"As it relates to the positives from the quarter, I'm encouraged by the performance of our International business, our Neighborhood Market sales in the U.S. and by our e-commerce growth," McMillon said.  "As it relates to our challenges in the quarter, we wanted to see stronger comps in Walmart U.S. and Sam's Club, but both reported flat comp sales.  Stronger sales in the U.S. businesses would've also helped our profit performance."

The flat U.S. comp performance followed a 0.3% decline the prior year, as an increase in transaction size offset a decline in traffic.  Total sales for Walmart's largest division increased 2.7% to $70.6 billion due to the addition of new selling space.  However, operating profits fell 2.4% to $5.25 billion.

"We delivered net sales growth of $1.9 billion in the second quarter," said Greg Foran, Walmart U.S. president and CEO.  "Our e-commerce business, including store-fulfilled sales, delivered double-digit sales growth," added the former Walmart International executive who replace Bill Simon as head of the U.S. division last week.

Same store sales at U.S. stores are forecast to be flat in the third quarter following a 0.3% decline last year.

Sam's delivered top line growth due to the addition of new clubs, but same store sales were flat.  Total sales increased 1.7% to $13 billion, excluding fuel.  Operating profits fell 4.6% to $494 million.

"Our top priority at Sam's Club remains growth - growing our member base and growing sales," said Rosalind Brewer, Sam's Club president and CEO.  "We're taking steps to increase the value of membership through investments in Plus member cash rewards and the cash back Mastercard.  It's still early, but member response has been positive.

Sam's is expecting third quarter comps to be slightly positive.

The relative bright spot in Walmart's second quarter was the international division where sales on a constant currency basis increased 5.3% to %34.6 billion and operating profits grew 8% to nearly $1.5 billion.

"We remain focused on price investment across all our markets and expect to continue driving improved comp performance," said David Cheesewright, Walmart International president and CEO.  "I am pleased with the trends in many of our markets, which were driven by a continued focus on being the lowest cost operator."

Faced with ongoing difficulties to drive top line growth at its two U.S. divisions coupled with expense pressures, Walmart said it expects third quarter earnings per share of $1.10 to $1.20 and lowered its full year forecast to a range of $4.90 to $5.15 from an earlier forecast of $5.10 to $5.45.

"Our guidance includes incremental investments in e-commerce and headwinds from higher health-care costs in the U.S. than previously estimated," said CFO Charles Holley.

Source: Retailing Today