Walmart Shares Cautious Outlook For Future Sales

May 15, 2014

Walmart continues to envision flat same store sales at its U.S. stores after reporting weaker than expected profits on weak U.S. sales results that were negatively affected by a winter that wouldn't end.

Net income declined 5% to $3.6 billion and earnings per share of $1.10 were five cents below analysts' expectations and below the company's prior year first quarter profit of $1.14.  Even excluding the effects of the severe winter, estimated by Walmart to be three cents a share, the company's profit figure would have been below the prior year amount, although with the guidance range of $1.10 to $1.20.

Sales at Walmart's U.S. stores increased 2% to $67.9 billion although same store sales declined 0.1% after declining 1.4% during the first quarter the prior year.  Sales at Sam's Club including fuel were essentially flat at 13.9 billion, but increased 0.5% if fuel sales are excluded.  Same store sales declined 0.5%, excluding fuel, after a prior year drop of 0.2%.

"Like other retailers in the United States, the unseasonably cold and disruptive weather negatively impacted U.S. sales and drove operating expenses higher than expected," said Doug McMillon, Wal-Mart Stores, Inc. president and CEO.  "Walmart's underlying business is solid, and I'm confident in our long-term strategies.  We'll continue to invest in price and enhance our service to improve sales.  We remain focused on growth across the enterprise, especially in small formats like Neighborhood Market in the U.S."

The company highlighted what it called significant investments in e-commerce initiatives, including its global technology platform, and said sales worldwide rose approximately 27% and noted that e-commerce had a 0.3% favorable impact on same store sales.

"We have the opportunity to create transformative growth through stronger e-commerce capabilities," McMillon said.  "Our investments are focused on improving customer experience and fulfillment capacity.  We're working to deliver a relevant personalized and seamless customer experience across all channels to further grow sales."

Total company sales for the quarter ended April 30 increased 0.8% to $114.2 billion, but would have grown 2.1% if a $1.6 billion negative impact of currency exchange rates were excluded from the calculation.

Walmart had set a low bar for itself heading into the quarter which began in early February as severe winter weather was hitting the nation at the time the company provided guidance calling for flat same store sales at U.S. stores and clubs.  Although weather conditions have improved nationwide, the retailer continues to forecast relatively flat comps while touting strong fundamentals of its business.

"A number of severe winter storms negatively impacted us during the quarter.  A solid start to spring and a strong Easter drove positive comps in the back half of the quarter," said Bill Simon, Walmart U.S. president and CEO.  "Neighborhood Markets continued to deliver strong results.  Comp sales increased approximately 5% for the quarter, and net sales have nearly doubled versus two years ago.  We saw strength across food and health and wellness, and we're particularly pleased with our overall traffic trend.  April marked the 46th consecutive month of positive comps for Neighborhood Market."

Like McMillon, Simon touted Walmart's solid fundamentals and said, "our recently launched initiatives, including the Walmart 2 Walmart money transfer service and the video game trade-in program, along with continued price investment, will resonate with the customer."

As for Sam's Club, president and CEO Rosalind Brewer, highlighted several noteworthy developments such as 10.9% growth in membership income driven by a fee increase.

"We expect that the combination of the national rollout of Sam's Club Cash Rewards and the launch of our new industry cash back credit card will enhance member value to drive stronger membership growth," Brewer said.  "These programs, along with our improvements in merchandise, are expected to drive better comp sales in the future."

Source: Retailing Today

Resurgent JCP Reports Surprisingly Strong Sales

May 15, 2014

Things took a wacky turn in the retail world this week as JCPenney reported a 6.2% same store sales increase and a huge gross margin expansion while Macy's, Kohl's and Walmart stumbled.

JCPenney still lost money, lots of it, during the quarter ended May 3, but total sales increased 6% to $2.8 billion.  The 6.2% same store sales increase the company reported was the result of sequential improvement throughout the quarter and broad-based strength across categories.  The comp increase would have been even stronger had the company employed a new method of calculating results that exclude temporary impacts it plans to use going forward.  For example, certain items such as sales return estimates and liquidation sales will now be excluded from same store sales calculation.  Had this methodology been applied during the first quarter, JCPenney would have reported a 7.4% comp increase rather than a 6.2% gain.

In addition to a same store sales surprise, gross margins expanded by 230 basis points to 33.1% of sales from 30.8% last year despite the negative effects of clearance activity.

"We are very pleased to report that JCPenney delivered its second consecutive quarter of comparable store sales growth, as well as continued gross margin improvement.  It is clear that our efforts to re-merchandise many areas of the store and revamp our messaging to the customer are taking hold," said JCPenney CEO Myron Ullman.  "Despite a difficult retail environment, our strong performance during the Easter holiday period and other key promotional events enabled us to deliver better than anticipated sales results.  We expect to carry this momentum into the second quarter as we continue to position the company for long-term profitable growth."

Women's and men's apparel, home, and fine jewelry were the company's top performing merchandise divisions in the quarter and Sephora inside JCPenney also continued its strong performance, according to the company.  Geographically, all regions delivered sales gains over the same period last year with the best performance in the western and central regions of the country.

Lest anyone get carried away with the company's performance, it is worth noting JCPenney was cycling against a prior year comp decline of 16.6% and it continues to report sizable losses.  The operating loss during the first quarter was $247 million, which was roughly half the prior year loss of $486 million.  A net loss of $352 million was worse than the prior year net loss of $348 million.

The other noteworthy development announced in conjunction with the release of first quarter results involved a new $2.35 billion credit facility to replace an existing $1.85 billion line of credit.

"With a solid plan in place to complete the turnaround, we are pleased with the support of our banking partners and their confidence in our ability to succeed," Ullman said.

Looking ahead, JCPenney expects a second quarter comp increase in the mid-single digits at its 1,100 stores and significant full year gross margin improvement.

Source: Retailing Today

Sears Looks To Sell Itself In Canada

May 14, 2014

Sears Holdings plans to hire an investment banking firm to explore strategic alternatives regarding its 51% ownership stake in Sears Canada.

The strategic alternatives are said to include the potential sale of Sears Holdings' interest or Sears Canada as a whole, according to a statement by the Hoffman Estates, Illinois-based company.  In a separate statement, Sears Canada said its board of directors intended to cooperate fully with Sears Holdings in the strategic alternatives exploration process to achieve full value for all shareholders.

Sears Canada is a separate publicly held company that operates 176 Sears stores, 233 hometown deal stores, seven Sears home services showrooms and approximately 1,400 catalog and online merchandise pick-up locations in Canada.

Sears Canada sales during the 13 week fourth quarter ended February 1, 2014 declined 9.6% to $1.18 billion compared to $1.3 billion during the 14 week period the prior year.  Same store sales also declined 6.4% due in large measure to extensive store closures related to severe winter weather.  Full year sales for the 52 week period declined 8.2% to nearly $4 billion from $4.3 billion during the 53 week prior year fiscal period.  Same store sales for the year fell 2.7%.

Source: Retailing Today

Macy's Has Less Than Magical Q1

May 14, 2014

The nation's leading department store retailer overcame weak first quarter sales to muster a 3.2% profit improvement and expressed confidence in its performance the remainder of the year.

The company's first quarter earnings per share of 60 cents was a penny better than analysts forecast and a 9% improvement from prior year earnings of 55 cents.  However, sales declined 1.7% to nearly $6.3 billion while same store sales, excluding sales from departments licensed to third parties, fell 1.6%

"Overall, business trends were soft in January through March, with the exception of the Valentine's Day shopping period," said Macy's chairman and CEO Terry Lundgren.  "The trend improved in April when the weather began to turn in northern climate zones.  We see this as a good sign moving forward into the second quarter."

In addition to weather, Lundgren said first quarter comparisons were negatively impacted by a calendar shift for the company's "Friends & Family" promotional event and comparisons against a strong performance during the first quarter the prior year.

Undeterred by the top line weakness, the company affirmed earlier guidance calling for full year same store sales growth in the range of 2.5% to 3% and earnings per share of $4.40 to $4.50.  The company also rewarded shareholders by increasing the quarterly dividend payout 25% to 31.25 cents and increasing the stock buyback program by $1.5 billion.

"The fundamentals of our business and our ongoing strategies remain strong," Lundgren said.  "This, combined with the momentum we have built over the past five years, leads us to feel confident about the company's prospects.  Our board shares this confidence and increased our dividend and share repurchase authorization to provide an even greater return for our shareholders."

Macy's ended the quarter with roughly 840 stores.

Source: Retailing Today

Dillard's, Inc. Reports First Quarter Results

May 15, 2014

Reports Record First Quarter Earnings per Share of $2.56 versus $2.50

Dillard's, Inc. (DDS-NYSE) announced operating results for the thirteen weeks ended May 3, 2014. 

Summary of the Company's First Quarter Performance

• A 2% increase in comparable store sales
• Diluted earnings per share of $2.56 versus $2.50
• Cash flow from operations of $161.9 million versus $136.9 million
• Share repurchase of $65.9 million (0.7 million shares) of Class A Common Stock

Dillard's Chief Executive Officer, William Dillard, II, stated, "We reported record earnings per share of $2.56 compared to $2.50.  Our 2% comparable store sales increase marks our 15th consecutive quarter of positive sales.  Additionally, we executed $65.9 million of share buyback as a result of our strong cash flow."

First Quarter Results

Dillard's reported net income for the prior year 13-week period ended May 4, 2013 of $111.7 million ($2.56 per share) compared to net income of $117.2 million ($2.50 per share) for the 13 weeks ended May 4, 2013.

Included in net income for the prior year 13-week period ended May 4, 2013 is a net after-tax credit totaling $4.4 million ($0.99 per share ) comprised of the following three items:

• A $7.6 million after tax gain ($0.16 per share) related to the sale of an investment
• A $1.0 million after tax credit ($0.02 per share) related to a pension adjustment
• After-tax asset impairment and store closing charges of $4.2 million ($0.09 per share)

Net Sales - 13 Weeks

Total merchandise sales for the 13-week period ended May 3, 2014 were $1.539 billion and $1.530 billion for the 13-week period ended May 4, 2013.  Total merchandise sales increased 1%, and sales in comparable stores increased 2% for the first quarter.

Sales trends for the first quarter were strongest in the men's apparel and accessories category and the juniors' and children's apparel category followed by ladies' accessories and lingerie.  Sales were weakest in home and furniture.  Sales trends were strongest in the Central region, followed by the Eastern and Western regions, respectively.

Net sales (which include the operations of the Company's construction business, CDI Contractors, LLC) for the 13 weeks ended May 3, 2014 were $1.551 billion and $1.549 billion for the 13 weeks ended May 4, 2013.

Gross Margin/Inventory

Gross margin from retail operations (which excludes CDI) decreased 14 basis points of sales for the 13 weeks ended May 3, 2014 compared to the 13 weeks ended May 4, 2013.  The decline resulted primarily from increased markdowns compared to the prior year first quarter.  Inventory increased 1% at May 3, 2014 compared to May 4, 2013.

Consolidated gross margin remained unchanged as a percentage of sales at 39.5% for the 13 weeks ended May 3, 2014 and May 4, 2013.

Selling, General & Administrative Expenses

Selling, general and administrative expenses ("operating expenses") were $393.7 million and $390.2 million for the 13 weeks ended May 3, 2014 and May 4, 2013, respectively, increasing 19 basis points of sales.  Increased selling payroll was partially offset by decreased advertising expense during the quarter.  Included in operating expenses for the prior year first quarter is a $1.5 million pretax credit ($1.0 million after tax of $0.02 per share) related to a pension adjustment.

Share Repurchase

During the quarter ended May 3, 2014, the Company repurchased $65.9 million (0.7 million shares) of Class A Common Stock at an average price of $89.34 per share under the Company's share repurchase plans.  Remaining authorization under the share repurchase program at May 3, 2014 was $224.5 million.

Total shares outstanding (Class A and Class B Common Stock) at May 4, 2013 were 43.2 million and 46.3 million, respectively.

Store Information

At May 3, 2014, the Company operated 278 Dillard's locations and 18 clearance centers spanning 29 states and an Internet store at www.dillards.com.  Total square footage at May 3, 2014 was 50.5 million.

Source:  Dillard's, Inc. Investor Relations

Old Navy Drives Gap's April Sales

May 9, 2014

Gap had a good April in terms of sales, and a large part of the reason is the company's Old Navy banner.

The company reported that April net sales increased 10% to $1.33 billion for the four-week period ended May 3, versus $1.21 billion last year.  Gap's comparable sales for April 2014 were up 9% versus a 7% increase last year.

For the first quarter so far, Gap's net sales have increased 1% to $3.77 billion versus $3.73 billion last year.  The company's comparable sales so far have decreased 1% versus a 2% increase last year.

"We are pleased with our execution overall in April, especially at Old Navy," said chairman and CEO Glenn Murphy.

For the month, comparable sales by global brand were as follows:

• Gap Global: up 3% versus an 8% increase last year
• Banana Republic Global: up 7% versus a 1% increase last year
• Old Navy Global: up 18% versus a 9% increase last year

The company expects diluted earnings per share for the first quarter to be in the range of $0.56 to $0.57.  It also expects gross margins for the quarter to decline less than the year-over-year decline in the fourth quarter of fiscal year 2013.  In addition, the company expects first quarter fiscal year 2014 operating expenses to be slightly above last year.

Gap will release its complete first quarter earnings results May 22, and will report May sales June 5.

Source: Retailing Today

Fred's Launches Aggressive Marketing Campaign

May 8, 2014

Fred's plans to implement a long-term marketing strategy stressing everyday low pricing and the convenience of a smaller box to help bolster sales against what the company describes as "intense competitive pressures."  The company's pharmacy operations continue to grow, however.

Fred's reported $150 million in sales for the four weeks ended May 3, representing a decline of 1.6% compared to year-ago sales.  For the first quarter ended May 3, sales totaled $498.5 million, down 0.6%.

Comparable store sales for the month of April decreased 2.3% compared with a 1.2% increase in the same period last year.  On a comparable store basis, year-to-date sales decreased 1.9% versus a 1.3% decrease for the year-earlier period.

"April's sales reflect the limited success of our legacy marketing strategies in matching up with prevailing intense competitive pressures," stated Bruce Efird, Fred's CEO.  "Beginning in late January, we started working with our outside marketing strategies to regain our sales momentum.  Working through extensive research and building a marketing strategy that can be sustained over the long term has taken several months to design, develop and validate", he said.  "One of the key findings of our research has pointed out that the aggressive use of our new strategy today is likely to be quickly embraced, based on the demographics of our customer base.  The team has put together a solid marketing plan to capitalize on Fred's position as a low-price leader and brand our convenience departments' advantages over small-box competitiors."

Fred's pharmacy department continued to demonstrate solid sales gains in April, with higher sales and comparable store script growth.  "However, these improvements were not sufficient to offset the sales shortfall in the other general merchandise departments, which experienced negative comparable sales and traffic declines in April," Efird noted.  "With this in mind, we now expect first quarter earnings per share to be in the range of $0.18 to $0.22.  As we now begin to implement our new marketing strategy, we expect to see its impact beginning in June, when we anticipate a return to positive comparable store sales in the range of 1% to 3%.

During April, Fred's opened three Xpress stores, closed two stores without pharmacies, and converted on Xpress into a full-service store.

Source: Retailing Today

Costco April Sales Beat Analysts' Expectations

May 8, 2014

The timing of Easter this year left Costco with 27 days of sales in April, rather than last year's 28.  But despite the Easter holiday shift, Costco still came out on top with a 7% increase in net sales that reportedly beat analysts' expectations.

The company reported net sales of $8.56 billion for the month, up from $7.98 billion during the similar four-week period last year.  Although Easter's timing this year did negatively impact this year's net and comparable sales by an estimated 1.5 to 2%, inflation in gasoline prices had a positive impact on comparable sales for the four-week period.

Total comparable sales increased 5%, U.S. comparable sales rose 5% and international comparable sales rose 2%.

Excludig gasoline prices and the negative impact of foreign currencies, total comparable sales rose 5%, U.S. comparable sales rose 5% and international comparable sales rose 7%.

Costco plans to report its third quarter results May 29.  It currently operates 652 warehouses, including 463 in the United States and Puerto Rico, 87 in Canada, 33 in Mexico, 25 in the United Kingdom, 19 in Japan, 10 in Taiwan, 10 in Korea and five in Australia.  Costco also operates electronic commerce web sites in the U.S., Canada, the United Kingdom and Mexico.

Source: Retailing Today

Whole Foods' Record Revenue Increase Not Enough For Street

May 7, 2014

Despite the Easter holiday shift, Whole Foods reported second quarter revenue of $3.32 billion, a record increase of 10% from the prior-year quarter.  But the record was not enough for Wall Street, which expected $3.34 billion.

The company's earnings per share of 38 cents for the quarter also came in below expectations of 41 cents per share.

Comparable store sales, including the negative impact of approximately 50 basis points from Easter shifting from the second quarter last year to the third quarter this year, increased 4.5% on top of a 6.9% increase in the prior year.  The spread between comparable store and identical store sales growth for the quarter due to five relocations and one expansion was approximately 50 basis points.

"The rapidly growing demand for fresh, healthy foods affirms our mission for the last 36 years and highlights the increasing growth opportunity ahead of us," said co-founder and co-CEO John Mackey.  "Whole Foods Market is the premier brand in natural and organic foods, with unparalleled quality standards and the broadest selection.  As we continue to innovate and evolve at a fast pace, we are confident in our ability to gain market share and expect our sales to approach $25 billion during the next five years."

Since the end of the first quarter, the company has added eight stores in six new markets.  In the second quarter, the company opened three new stores.  So far in the third quarter, the company has opened one new store and completed its acquisition of four New Frontiers Natural Marketplace stores in Flagstaff, Prescott and Sedona, Arizona; and San Luis Obispo, California.  The company expects to open seven additional stores in the third quarter and another 11 to 14 stores in the fourth quarter.

Whole Foods currently operates 379 stores totaling approximately 14.4 million sq. ft. and expects to cross the 500 store mark in 2017.  Longer term, the company still sees demand for 1,200 Whole Foods Market stores in the United States.

The company has increased its development pipeline to a record 114 stores with the signing of nine new leases, including one relocation, totaling approximately 410,000 sq. ft.  These leases include three new markets and are located in Fayetteville, Arizona; Honolulu, Hawaii; Indianapolis, Indiana; Metuchen, New Jersey; Chappaqua, New York; Lower Gwynedd Township, Pennsylvania; Fort Worth, Texas; and Richmond, Virginia.

Looking ahead, the company is revising its fiscal year 2014 outlook and now expects sales growth of approximately 11%, comparable store sales growth of 5% to 5.5% and diluted earnings per share of $1.52 to $1.56.

The company expects the Easter shift to positively impact comparable store sales growth in the third quarter by approximately 50 basis points.

Source: Retailing Today

Walgreens Sees Boost In April Sales

May 5, 2014

Walgreens posted April sales of $6.49 billion, an increase of 8.8% from $5.96 billion for the same month in fiscal 2013.

Total front-end sales increased 8.8% in April compared with the same month in fiscal 2013, while same-store front-end sales increased 8.2%.  Customer traffic in comparable stores increased 2.6% while basket size increased 5.6%.

For the combined March/April period that includes the Easter holiday season impact, comparable store front-end sales increased by 2.1%, while customer traffic in comparable stores decreased 0.9% and basket size increased 3%.

Prescriptions filled at comparable stores increased by 3.5% in April and increased 4.3% on a calendar day-shift adjusted basis.  April 2014 had one additional Wednesday and one fewer Monday compared with April 2013.  The retailer noted that the calendar shifts negatively impacted prescriptions filled at comparable stores by 0.8 percentage point.

April pharmacy sales increased by 9.2%.  Comparable store pharmacy sales increased 7.3% and increased by a calendar day-shift adjusted 8.1%.  Calendar day shifts negatively impacted pharmacy sales in comparable stores by 0.8 percentage point.  Calendar day-shift adjusted comparable store pharmacy sales were negatively impacted by 1.3 percentage points due to generic drug introductions in the last 12 months.  Pharmacy sales accounted for 64.5% of total sales for the month, the company stated.

Sales in comparable stores increased by 7.6% in April.  Calendar day shifts negatively impacted total comparable sales by 0.5 percentage point.  Generic drug introductions in the last 12 months negatively impacted total comparable sales by 0.8 percentage point.

Sales for the combined months of March and April 2014 increased 6.6% from the same two months in 2013.  Comparable store sales for the March/April period increased 5.5%.

Source: Retailing Today

CVS 'Solid' In First Quarter

May 2, 2014

Despite severe weather-related issues during the first quarter, CVS reported "solid results" across the enterprise and executives expressed optimism in achieving 2014 goals.

"It is unusual to hear us talk about the impact of weather on our business.  Historically, it has been our practice to not blame the weather when we explain our results, but this quarter the amount of severe weather was so abnormal that, quite frankly, it is hard not to talk about it," Larry Merlo, president and CEO told analysts during Friday morning's conference call to discuss results.  "...While disappointed that the severe weather put a damper on an otherwise excellent quarter, we remain very confident in our outlook for the full year."

Net income during the quarter rose 18.3% to $1.1 billion, compared with approximately $1 billion in the year-ago period.  Adjusted earnings per share for the three months ended March 31, 2014 and 2013, was $1.02 and $0.83, respectively, an increase of 22.5%.

Net revenues for the three months ended March 31, 2014, increased 6.3% to $32.7 billion versus the year-ago period.

Revenues in the pharmacy services segment increased 10.3% to $20.2 billion during the quarter, primarily driven by growth in its specialty pharmacy business, including the acquisition of Coram, as well as drug cost inflation, new clients and new products.

Speaking of the specialty pharmacy business, Merlo told analysts that it remains strong with revenues up about 34% year-over-year.  He noted that the integration of Coram is "going well," as the sales forces are being aligned and integrated products are being developed.

Merlo also said that the rollout of its new Specialty Connect offering is expected to be completed at the end of the quarter.  Specialty Connect is analogous to Maintenance Choice as it connects mail and retail capabilities to provide choice and convenience for members.

"We are positioned to continue to gain share in the fast-growing specialty marketplace as we developed innovative offerings that capitalize on our unique ability to optimize cost, quality and access," Merlo told analysts.

Revenues in the retail business increased 2.7% to $16.5 billion during the quarter.  Same-store sales increased 1.4% with pharmacy same-store sales up 3.8% and front store same store sales down 3.8%.  Both front same-store sales and pharmacy same-store sales were negatively impacted by a weaker flu season in the three months ended March 31, 2014 and severe weather across much of the United States, compared with the prior year, the company stated.

Despite the decline in front same-store sales, front store basket size improved modestly while front store margins improved notably during the quarter.  The increase in total same-store sales was primarily driven by the growth of prescription volumes and brand name drug cost inflation.  Pharmacy same store sales include a negative impact of approximately 120 basis points from recent generic drug introductions, the company noted.

Merlo stressed the importance of developing a sustainable front-end strategy and said that, as rivals increased promotional activity, CVS/pharmacy reduced its circular ad blocks year-over-year by about 6%.

"As a result of staying true to our targeted promotion strategy, I'm pleased to say that we saw growth in our average basket size, along with notable growth in our front store margin in the quarter.  Of course, we would like to see better front store comps but it is important that we have a sustainable front-end strategy."

For example, through insights from its ExtraCare loyalty program and its predictive modeling for personalized emails, it has experienced email open rates that are two times the industry average and response rates that are five times the industry norm.  Furthermore, the CVS/pharmacy ExtraCare Beauty Club is enjoying the impact of personalization as it has engaged 13 million of the company's best beauty customers, and the members are spending more than twice as much as the average beauty customer.

With regard to MinuteClinic, revenues were up 11.4% during the quarter.  There are currently 828 clinics in operation with plans to open at least 150 new clinics this year.  Of the new openings, about one-third will be in new markets.

Looking ahead, CVS Caremark confirmed its earnings guidance range for the full year 2014 and expects to deliver adjusted EPS of $4.36 to $4.50 and GAAP diluted earnings per share from continuing operations of $4.09 to $4.23 in 2014.  The retailer also continues to expect to deliver 2014 free cash flow of $5.5 billion to $5.8 billion, and 2014 cash flow from operations guidance of $7 billion to $7.3 billion.

"All the ongoing changes that we are seeing in the healthcare environment are certainly creating unique opportunities for CVS Caremark.  Our unmatched model in innovative solutions makes us well positioned to capitalize on these opportunities and we believe creates a sustainable competitive advantage," Merlo told analysts.

Source: Retailing Today

Safeway Sees Uptick In Sales In First Quarter

April 24, 2014

Safeway posted sales of $8.3 billion in the first quarter of 2014, representing an increase of 1%.  The slight uptick in sales was primarily attributed to an identical-store sales (excluding fuel) increase of 1.8%, partly offset by lower fuel sales in 2014.

This increase of 1.8% consists of a 1% increase in price per item and a 0.8% increase in volume.  Safeway's share of sales in all outlet channels increased slightly, and sales to its most loyal households improved during the quarter.

"We are working diligently to close the merger with Albertsons by the fourth quarter," stated Robert Edwards, Safeway president & CEO.  "While sales met plan in the first quarter, income was slightly below plan, in part as a result of inflation in produce, meat and pharmacy that was not fully passed along for competitive reasons.  In the second quarter of 2014, identical-store sales are currently running well above 2%, and we expect to pass along most of the inflation we ar experiencing.  In addition, the direct and indirect cost initiatives we are implementing are expected to improve profitability in the second half of 2014."

Safeway continues to drive sales momentum through its center of store remodels, as well as merchandising premium, Hispanic and Asian products to meet local demographic needs, Edwards reported.  "In addition, our sales of organic and natural products continue to grow at a rapid pace, with our private label brands O Organics and Open Nature growing approximately two times faster than the rest of the market."

Source: Retailing Today 

Supervalu CEO Pleased With Fourth-Quarter Results

April 23, 2014

Things are looking good for Supervalu, which reported fourth quarter fiscal 2014 net sales of $4 billion, up 1.4%, and net earnings of $26 million, or $0.10 per diluted share.

"Fiscal 2014 was an important transition year for Supervalu as we stabilized the organization and set the foundation for our future," stated Sam Duncan, Supervalu president and CEO.  "I am pleased with the direction of our business segments and look forward to the new fiscal year where we can focus our attention on driving sales growth across the organization."

Identical store sales in the retail food segment were positive 0.2%.  Identical store sales in the Save-A-Lot network were positive 2.1%.  Identical store sales for corporate stores within the Save-A-Lot network were positive 3.5%.

Total sales within the independent business segment decreased 0.6% primarily due to the continued impact of losing two large customers and lower military sales partially offset by net new business.

Source: Retailing Today

Rite Aid Delivers 'Strong' Fourth Quarter, Acquires RediClinic

April 10, 2014

In the wake of acquiring Houston-based RediClinic, Rite Aid reported revenues of $6.6 billion for the fourth quarter ended March 1, resulting from a 2.2% lift primarily attributed to an increase in pharmacy same-store sales.

For the full year, Rite Aid reported $25.5 billion in revenues, up 0.5%.

For the quarter, the company reported net income of $55.4 million or $0.06 per diluted share, and adjusted EBITDA of $356.3 million, or 5.4% of revenues.  For the full year, Rite Aid reported net income of $249.4 million or $0.23 per diluted share, and adjusted EBITDA of $1.3 billion, or 5.2% of revenues.

"Thanks to the strong teamwork of our dedicated Rite Aid associates, we delivered strong fourth-quarter and fiscal 2014 results, including new company records for fourth-quarter and full-year adjusted EBITDA," stated Rite Aid chairman and CEO John Standley.  "These accomplishments reflect the significant progress we're making in executing key initiatives and delivering on our promise to actively work with our customers to keep them well," he said.  "Our recent acquisitions of Health Dialog and RediClinic, our expanded partnership with McKesson and our continued commitment to investing in our store base have positioned us to transition our strategy from turnaround to growth as we more aggressively pursue opportunities to become a growing retail healthcare company."

Same-store sales for the quarter increased 2.1% over the prior year, consisting of a 3.5% increase in pharmacy sales, partially offset by a 0.7% decrease in front-end sales.  Pharmacy sales included an approximate 123 basis point negative impact from new generic introductions.  The number of prescriptions filled in same stores decreased 1.8% over the prior year period, with 1.3% of this decrease being driven by a decrease in flu-related prescriptions and flu shots.  Prescription sales accounted for 67.5% of total drug store sales, and third party prescription revenue was 97.1% of pharmacy sales.

In the fourth quarter, the company relocated two stores, remodeled 94 stores and expanded three stores, bringing the total number of wellness stores chainwide to 1,215.  The company also closed eight stores, resulting in a total store count of 4,587 at the end of the fourth quarter.

Comparable sales for the year increased 0.7% consisting of a 1.2% increase in pharmacy sales, partially offset by a 0.2% decrease in front-end sales.  Pharmacy sales included an approximate 232 basis point negative impact from new generic introductions.  The number of prescriptions filled in same stores decreased 0.3% over the prior year period.  Prescription sales accounted for 67.9% of total drugstore sales, and third party prescription revenue was 97% of pharmacy sales.

For the year, the company relocated 11 stores, acquired one store, remodeled 405 stores, expanded four stores and closed 37 stores.

Rite Aid said it expects sales for fiscal 2015 to be between $26 billion and $26.5 billion with same-store sales expected to range from an increase of 2.5% to an increase of 4.5% over fiscal 2014.

The company's outlook for fiscal 2015 is based on the anticipated benefits of its wellness remodels, customer loyalty program, new pharmacy sourcing arrangement with McKesson and other initiatives to grow sales and drive operational efficiencies.  The company's outlook also considers planned wage and benefit increases, the introduction of new generics in the second half of fiscal 2015, generic drug price increases and a challenging reimbursement rate environment.

Capital expenditures are expected to be approximately $525 million.  This number does not include the purchases of Health Dialog or RediClinic, Rite Aid noted.

Source: Retailing Today

Family Dollar Makes Strategic Changes Following Disappointing Q2

April 10, 2014

Family Dollar plans to close 370 underperforming stores, cut jobs and lower prices on 1,000 basic items following a disappointing second quarter, which was adversely affected by the extra week in last year's quarter, severe weather, holiday promotions and a challenging consumer environment.

The company is also slowing its new store growth beginning in fiscal 2015 to bolster its return on investment.  It now anticipates opening 350 to 400 new stores as opposed to approximately 525 stores in 2014.

Net income in the quarter ended March 1 fell 35% to $90.9 million from $140.1 million in the year-ago period.  Net sales decreased 6.1% to $2.7 billion, from $2.9 billion.  Same-store sales declined 3.8% as a result of decreased customer transactions, partially offset by an increase in the average customer transaction value.

"Our second quarter results did not meet our expectations," said chairman and CEO Howard R. Levine.  "The 2013 holiday season was challenged by a more promotional competitive environment and a more financially constrained consumer.  In addition, like many retailers, our second quarter results were significantly impacted by severe weather, which resulted in numerous store closings, disrupted merchandise deliveries and higher than expected utility and store maintenance expenses."

The job cuts and store closures are expected to reduce annual operating costs by $40 million to $45 million beginning third quarter of fiscal 2014.

Looking ahead, the company expects to record an estimated $85 million to $95 million restructuring charge in the second half of fiscal 2014 related to the workforce reductions and store closures.

For the third quarter of fiscal 2014, Family Dollar expects that same-store sales will decline in the low single digit range and for the fourth quarter of fiscal 2014, the company expects that same-store sales will be flat to up slightly.  Family Dollar also expects a low single digit increase in net sales during the full fiscal year.

Source: Retailing Today

Fred's Fourth Quarter Takes Hit

March 27, 2014

Favorable tax credits and a 53rd week in fiscal 2012 affected Fred's net income results for the fourth quarter.  Severe weather also contributed some to the company's net sales decline, as did higher-than-normal utility bills and rising generic drug costs.

The company reported a substantial 34.5% decrease in its net income during the quarter of fiscal 2013, to $5.56 million from $8.49 million in the same quarter a year earlier.  Net sales declined 7.2% to $495 million from $533.4 million, and same store sales grew 0.1%.

"Our comapny's performance in the fourth quarter reflected all the difficulties that have been cited throughout the retail sector recently as we dealt with the unusually harsh weather of the past several months and a significant 24% increase in the cost of generic drugs, which reduced gross margin by 100 basis points in our pharmacy department," said CEO Bruce A. Efird.  "Operationally, we achieved earnings of $0.17 per share for the quarter."

During the full fiscal year, Fred's net income fell 12% to $26 million from $29.6 million and net sales dropped 0.8% to $1.94 million from $1.95 million.

Looking ahead, total sales for first quarter 2014 are expected to be flat to up 2%.  Same-store sales for the first quarter are expected to be flat to down 2% reflecting poor weather conditions and weather-related store closings that have affected Lawn & Garden and other seasonal merchandise.

Source: Retailing Today

Walgreens Sees Top-Line Growth In Second Quarter

March 25, 2014

Despite expected headwinds from slower generic drug introductions, comparisons with last year's flu season and severe weather, Walgreens saw solid top-line growth in the second quarter ended February 28, driven by record quarterly sales and record second quarter prescriptions filled.

The company also continued to gain prescription market share while maintaining a firm hold on its costs. 

Walgreens posted a sales increase of 5.1% to $19.6 billion for the quarter.  First half sales were up 5.5% to $37.9 billion.

Prescription sales, which accounted for 62.2% of sales in the quarter, increased 7%, while prescription sales in comparable stores increased 5.8%.  The company filled 214 million prescriptions in the quarter, an increase of 2.8% over last year's second quarter.  Prescriptions filled in comparable stores increased 2.2% in the quarter.  As of February 28, Walgreens increased its retail prescription market share 20 basis points from a year ago to 19% as reported by IMS Health on a 30-day adjusted basis.

Walgreens also saw strong growth in prescriptions filled for Medicare Part D patients, which increased 16% in the second quarter compared with last year's quarter, while the company's Part D market share increased 80 basis points in February compared with the same month a year ago.  "Our Medicare Part D program is accelerating our momentum in pharmacy," Greg Wasson, president and CEO Walgreens, told analysts.  "As we move forward we are well positioned with senior customers as a preferred provider in four of the top national plans," he said.

And Walgreens has been recognized by patients and payers for tightly integrating its health and wellness services with its retail clinic offerings, Wasson said.  Patients appreciate the convenience of services and payers view Walgreens as an emerging alternative healthcare model and part of the patient care delivery team, he said.  "To help meet this growing demand, we have a goal to add nearly 100 new Healthcare Clinic locations in calendar 2014 on top of our 400 current retail clinics."

In addition, Walgreens has grown its 90-day at retail business substantially.  The 90-day at retail prescriptions were up 15%, Wasson said.  "For perspective, our 90-day at retail alone is as large as one-third of the total mail market industry," Wasson said.

The total number of all CDC-recommended immunizations and vaccines administered by Walgreens reached 8.6 million in the first half of the fiscal year, an 11% increase over the previous year.

Front-end comparable store sales increased 2% in the second quarter, customer traffic in comparable stores decreased 1.4% and basket size increased 3.4%, while total sales in comparable stores increased 4.3%.

"We head into the second half of the year with nearly 80 million active members in our Balance Rewards loyalty program and with expectations that the generic drug headwind that affected the first half will ease and turn around by the end of the year," Wasson added.  "With 80 million active members - we now have the largest loyalty program in the industry," he told analysts.

The company is leveraging insights from its Balance Rewards loyalty program to provide customers with more value and simplified promotions.  Balance Rewards reached a milestone in February with more than 100 million enrollees and nearly 80 million active members at the end of this year's second quarter.

Walgreens is also leveraging its omnichannel reach across all sales channels, Wasson said.  "Today, 9 million customers touch the Walgreens brand every day - at our stores, over the web or through mobile channels - making Walgreens a true omnichannel provider."

"In addition, our joint synergy program with Alliance Boots is expected to exceed its second-year estimate, and we are bringing critical elements of the Well Experience to additional stores," Wasson noted.  Wasson noted there are now 628 Well Experience stores across the nation.

The combined synergies for Walgreens and its strategic partner, Alliance Boots, in the first half of fiscal 2014 were approximately $236 million.  The joint synergy program is now estimated to deliver second-year combined synergies of $375-$425 million, an increase from the previous second-year estimate of $350-$400 million.

Walgreens also announced Tuesday that as part of its efforts to optimize the company's asset base, it plans to close 76 drug stores during the second half of fiscal 2014.  Including these store closures, Walgreens still expects a net increase in its store count in fiscal 2014 of approximately 55-75 locations.  "While we seize the opportunity for store growth as the population ages and consumers look to community pharmacy for their health care needs, we also continue to focus on optimizing our assets and organization to position Walgreens for our future as a global company," Wasson said.

The store closures represent less than 1% of Walgreens' store base, Wasson added.

In the fiscal 2014 second quarter, the company opened or acquired 28 new drug stores compared with 29 in the year-ago quarter.

At February 28, Walgreens operated 8,681 locations in all 50 states, the District of Columbia, Puerto Rico, Guam and the U.S. Virgin Islands.  The company has 8,210 drug stores nationwide, 138 more than a year ago.  Walgreens also operates worksite health and wellness centers, infusion and respiratory services, specialty pharmacies and mail service facilities.  Its Take Care Health Systems subsidiary manages more than 700 in-store convenient care clinics and worksite health and wellness centers.

Source: Retailing Today 

Kenmore And Craftsman Can't Help Sears

March 14, 2014

Sears Hometown and Outlet Stores said Fourth-quarter same-store sales declined 3.4% as two of the company's best known brands had disappointing results. 

Sales in the fourth quarter declined 4.5% to $602.4 million due to the combination of a 3.4% same-store sales decline and an extra week in the fourth quarter the prior year, which added sales of $36.5 million.  The same-store sales decline was made up of a 4% decline at the Hometown division and a 1.5% decline at the Outlet division.

The comp decline was primarily driven by lower consumer electronics sales following a planned exit from the category in most Hometown stores, lower sales in the tool category in both segments, lower apparel sales in Outlet stores and lower major appliance sales in Hometown.  The decreases were partially offset by higher lawn and garden sales in Hometown and higher major appliance and furniture sales in Outlet.  If consumer electronics are excluded from the comp calculations, the total decline was only 1.1% overall, consisting of a 1% decrease at Hometown stores and a 1.3% decrease at Outlet stores.

"Fourth quarter results were disappointing, especially in the Hometown and Hardware segment where holiday sales and margins of our important Kenmore appliances and Craftsman tools significantly underperformed management's expectations," said president and CEO Bruce Johnson.  "In the Outlet segment, increased holiday promotional spending did not drive the expected sales increases.  Total company January sales were negatively impacted by the unusually severe winter weather in many of our trade areas." 

That said, Johnson noted that the company made significant progress on four key strategic fronts during the quarter that leave it favorably positioned for 2014.  For starters, Johnson said 30 new stores were opened during the past fiscal year with half of those coming in January.  "Total sales from these 30 new stores during the first quarter of 2014 to date have met our expectations, with particularly strong sales from the new Outlet Stores, which accounted for 13 of the 30," Johnson said. 

The company also continued its transition to a model whereby stores are operated primarily by independent dealers and franchises.  After 19 conversions in the fourth quarter, 1,115 of the company's 1,260 stores are now operated by dealers and franchisees.  Johnson also said the company achieved double-digit year-on-year growth in both online and multichannel sales, particularly at Searsoutlet.com, where sales for the quarter grew nearly 80% from the prior year to approximately $11 million.

Finally, new Outlet sourcing initiatives began to shift inventory positions in furniture, apparel and out-of-box appliances, to products Johnson said he is confident will deliver higher overall merchandise margins than in the fourth quarter of 2013.

Source: Retailing Today

Ascena Reduces Outlook Further

March 3, 2014

Ascena Retail Group, the operator of Lane Bryant, Justice and Dress Barn stores, cited increased spending on growth initiatives and a challenging sales climate for a second quarter profit decline and its second full year earnings guidance reduction in two months.

Sales for the company's second quarter ended January 26 increased 2% to $1.3 billion, while consolidated same-store sales were essentially flat.  A 3% comp decline at physical stores was offset by 28% e-commerce growth to achieve the overall flat comp increase.  Net income fell to $31.9 million, or 19 cents a share, from $47 million, or 29 cents a share last year.

The decrease was due primarily to profit declines at Justice stores and increased operating expenses from growth-related investments in new stores, merchandising and design resources and e-commerce capabilities, according to the company.

"Second quarter net income was slightly above our revised expectations, despite softer than expected sales in January driven primarily by challenging weather that continued to negatively impact sales into early March," said Ascena president and CEO David Jaffe.  "However, in warmer regions sales have been in line with expectations.  We are implementing promotional strategies and receipt flow adjustments to bring inventory balances back to targeted levels."

Jaffe remained optimistic about the company outlook, citing very good progress on long range strategic priorities related to synergy initiatives and recently completed construction of a new national retail distribution center and a new e-commerce fulfillment center that becomes operational in the spring.

Ascena's profits were expected to be under pressure following a January 13 announcement regarding holiday sales during November and December.  At the time, Jaffe noted that "a challenging holiday selling season resulted in increased promotional activity.  We successfully cleared excess inventory and have taken the necessary markdowns in the second quarter to transition cleanly into the spring season."

As a result, the company shaved as much as 20 cents of its full year profit forecast, reducing the range of earnings possibilities to $1.10 to $1.15 from earlier guidance of $1.25 to $1.30 for its fiscal year ending in July.  However, late Monday, the company further reduced its full year estimate to a range of $1 to $1.05.

The soft holiday sales and expense pressure followed a respectable showing in the company's first quarter ended October 26 in which each of its formats posted positive same store sales growth.

Source: Retailing Today

Kroger And Costco Outshine Walmart

March 6, 2014

Walmart didn't mention competitive issues as a source of sales weakness during its fourth quarter, but reports this week from Kroger and Costco indicate they were at least a contributing factor.

This was especially true in the case of Costco.  Recall that Sam's reported a same store sales decline of 0.1% during the fourth quarter ended January 31, after a 1.8% gain the prior year.  Operating income fell 15.3% to $425 million.  At the time, Sam's president and CEO Rosalind Brewer said the underlying health of the Sam's Club business was sound and that restructering efforts, including the elimination of 2,300 positions from club operations were allowing Sam's to be more agile and focused on growth opportunities.

"The stragegies we have in place will deliver value for our members, helping to grow the business and drive strong financial performance in fiscal year 2015," Brewer said.

Sam's expects its same store sales for the first quarter ending May 2 to be relatively flat following a 0.2% gain last year.

Conversely, Costco grew its U.S. same store sales, excluding fuel by 5% during its second quarter ended February 16.  Sam's fourth quarter and Costco's second quarter don't totally match up, but both companies' reporting periods included the holiday season.  It was evident from Costco's results and comments from CFO Richard Galanti that Costco went hard after price at the expense of profitability during the shortened and weather impacted holiday season.

For example, despite the 5% domestic comp increase, Costco's net income declined to $463 million, or $1.05 a share, compared to $547 million, or $1.24 a share, during the second quarter the prior year.  Comparisons to the prior year were made more difficult because the period included a 14 cent a share one time tax benefit related to a portion of a special cash dividend the company paid in December 2012 to 401k plan participants.

"Even with that distinction, however, the year-over-year comparison was unfavorable," Galanti said.

Contributing to profit pressures at Costco were weaker sales and gross margin results in certain non-foods merchandise categories, particularly during the four-week holiday selling season, weaker gross margins in the fresh foods business and lower reported international profits resulting from the significant weakening of foreign exchange rates, according to Galanti.

"The first four-week period of the quarter represented the majority of earnings underperformance in the quarter," Galanti said.  Costco's second quarter began on November 25, 2013 and encompassed the Thanksgiving weekend which fell late last year and compressed the holiday season.

While Costco was outcomping Sam's, Kroger was doing the same to Walmart and made no mention of bad weather or food stamp reductions in its earnings release.  Kroger reported a 4.3% increase in identical store sales, excluding fuel, and said it expects first quarter comps to rise between 2.5% and 3.5% against a backdrop of minimal inflation.

Walmart reported a 0.4% decline in same store sales at U.S. stores following a 0.3% increase last year.  Looking forward, Walmart's forecast for first quarter same store sales is flat compared to a prior year decline of 1.4%.

Source: Retailing Today