Sales Solid, But Holidays Pressured Profits At Costco

March 6, 2014

In the sales versus margins battle at Costco, sales got the upper hand during the holiday season and the company's second quarter, ended February 16.

Costco managed to grow sales by 5.8% to $25.76 billion and same-store sales, excluding fuel, at U.S. clubs rose a healthy 5%.  However, in a shortened and intensely priced competitive holiday season impacted by severe winter weather, Costco sacrificed margin to maintain member satisfaction, which was evident in membership free income that grew 4.2% to $550 million.  The tradeoff between sales and margins was evident in the company's bottom line as 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-cents-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," said Costco CFO Richard Galanti.  "Despite satisfactory sales results during the second fiscal quarter, several other factors led to lower earnings.  The first four-week period of the fourth quarter represented the majority of earnings underperformance in the quarter," Galanti said.

Costco's second quarter began November 25, 2013 and encompassed the Thanksgiving weekend, which fell late last year and compressed the holiday season.

Total company same-store sales during the quarter, excluding fuel and the effects of foreign currency, increased 5% and consisted of a 7% gain internationally and a 5% domestic increase.

Costco ended the period with 649 stores, consisting of 462 locations in the U.S. and Puerto Rico, 87 in Canada, 33 in Mexico, 25 in the United Kingdom, 18 in Japan, 10 in Taiwan, 9 in Korea and 5 in Australia.  The company plans to open as many as 14 new stores before the end of its fiscal year August 31, 2014.

Source: Retailing Today

Sears Narrows Loss In Fourth Quarter

February 27, 2014

As far as sales go, Sears Holdings didn't have a very happy holiday.  But the company was still able to narrow its loss for the fourth quarter, as it lowered expenses and reduced inventory.

The company said the costs of transforming into a member-centric retailer using an integrated online platform and the omnichannel Shop Your Way membership program fueled its net losses.  It attributed declining revenues to lower same store sales and having fewer stores in operation.

Sears lost $358 million for the period ended February 1, compared with a loss of $489 million a year ago.

Sales dropped 14% to $10.6 billion, from $12.3 billion.  Same store sales fell 6.4%.  At Sears stores, the metric was down 7.8%.  It fell 5.1% at Kmart.

For the fiscal year, Sears reported a net loss of $1.4 billion, compared to a $930 million net loss in the previous fiscal year.

Revenues also declined during the fourth quarter and fiscal year.  Quarterly revenues dropped 14% to $10.6 billion from $12.3 billion, and annual revenues declined 9% to $36.2 billion from $39.9 billion.  Same store sales declined 3.8%, with decreases of 3.6% at Kmart and 4.1% at Sears Domestic.

"During 2013, we made progress in our continuing transformation into a member-centric retailer leveraging Shop Your Way and integrated retail, which we believe will position us for enhanced growth and profitability to create long-term shareholder value," said Edward S. Lampert, Sears Holdings' chairman and CEO.  "Our full year results are impacted during this transformation as we continue supporting traditional promotional programs and marketing expenditures while we invest in our Shop Your Way program and integrated retail strategy.  We have been investing hundreds of millions of dollars annually in our transformation and will continue to invest in the future of the company."

The company said it continues to explore "strategic alternatives" for its auto centers and Lands' End business.

Source: Retailing Today

J.C. Penney's Q4 Shows Signs Of Progress

February 26, 2014

In a sign of some progress in its turnaround efforts, J.C. Penney reported a net profit of $35 million for the fourth quarter ended February 1, compared to a loss of $552 million a year ago.  Excluding a tax benefit and other items, Penney had a loss of $206 million for the quarter.

Looking forward, the company expects same store sales to increase approximately 3% to 5% for the first quarter and to increase mid-single digits for the full year 2014.

Net sales for the quarter fell 2.6% to $3.78 billion from $4.88 billion in the year ago quarter, which included an additional 53rd week.  Analysts had expected $3.85 billion.

Same-store sales rose 2% for the quarter, with holiday sales up 3%.  Online sales were $381 million for the quarter, up 26.3% versus the same period last year, excluding the 53rd week.

The company's top performing merchandising divisions were home, men's apparel, women's accessories and Sephora.

"J.C. Penney achieved what it set out do to on a number of important fronts in 2013," said CEO Myron Ullman.  "We stabilized our business, both financially and operationally, and restored our process disciplines, promotions, inventory levels and focus on the customer.  As a result, we generated positive comparable store sales in the fourth quarter and ended the year with more than $2 billion in total available liquidity."

For the full year, the company reported an operating loss of $1.42 billion, which includes $215 million of restructuring and management transition charges.

Ullman said the retailer's turnaround is gaining momentum.  "With the most challenging and expensive parts of the turnaround behind us, we will focus on improving gross margin, managing expense and steadily growing our sales in 2014.  Our strategic plan seeks to enhance performance across all of the key drivers of our business: merchandising, marketing, store experience, jcp.com, our teams, and our operations.  The goal is to deliver consistently improving financial results, and to restore J.C. Penney as a leader in American retail."

Source: Retailing Today

Target Data Breach May Affect Future Profits

February 26, 2014

Target continues to cope with the fallout of a data breach, which, as expected, hurt the company's fourth quarter results.  The company incurred $61 million in expenses related to the breach during the quarter, but was able to bring the total impact to $17 million after applying a $44 million insurance payment.

But the retailer added that it is not only unable to estimate future expenses related to the data breach but also warned that those costs may adversely affect operations results in the first quarter and full year 2014 and future periods.

Expenses may include payments associated with potential claims by the payment card networks for alleged counterfeit fraud losses and non-ordinary course operating expenses (such as card re-issuance costs), REDcard fraud and card re-issuance expense, payments associated with civil litigation, governmental investigations and enforcement proceedings, expenses for legal, investigative and consulting fees and incremental expenses and capital investments for remediation activities.

"For more than 50 years Target has succeeded by focusing on our guests," said chairman, president and CEO Gregg Steinhafel.  "During the first half of the fourth quarter, our guest-focused holiday merchandising and marketing plans drove better-than-expected sales. However, results softened meaningfully following our December announcement of a data breach.  As we plan for the new fiscal year, we will continue to work tirelessly to win back the confidence of our guests and deliver irresistible merchandise and offers, and we are encouraged that sales trends have improved in recent weeks."

Net earnings dropped to $520 million from $961 million in the prior year period.  Sales decreased 6.6% to $20.9 billion from $44.4 billion last year, reflecting the impace of an additional accounting week in 2012 as well as a 2.5% decrease in comparable-store sales, partially offset by the contribution of new stores.

Target operates 1,917 stores: 1,793 in the United States and 124 in Canada.

Source: Retailing Today

Office Depot Focuses On Global Growth Following Q4

February 25, 2014

Since Office Depot completed its merger transaction with Office Max November 5, 2013, the company has been aggressively executing its integration plan.  The company's fourth quarter results for the period ended December 28, 2013 include OfficeMax's operations, which generated $939 million of sales.

Chairman and CEO Roland Smith said that the company is focused on a number of key priorities, which include creating a lean organization with clear roles and accountabilities as well as defining its vision, mission and long-term global growth strategy.  Smith anticipates that the company's comprehensive reorganization will be completed by the end of the month.

"For 2014, we are committed to delivering not less than $140 million of adjusted operating income," he added.

Total sales for the quarter increased 33% to $3.5 billion compared to the prior year quarter.  The company also reported an operating loss of $118 million for the quarter compared to operating income of $5 million in the prior year quarter, and a net loss attributable to common stockholders of $144 million, or $0.34 per share, compared to a net loss of $17 million, or $0.06 per diluted share in the prior year quarter.  The reported results include merger-related expenses, asset impairment and other charges.

Following the merger with Office Max, divisional reporting was aligned to the three divisions historically utilized by Office Depot: North American Retail, North American Business Solutions, and International.  The former OfficeMax U.S. Retail business is included in North American Retail, the former Office Max U.S. Contract and Canada businesses are included in Business Solutions and the former Office Max businesses in Australia, New Zealand and Mexico are included in International.

North American Retail Division sales in the quarter increased 31% to $1.4 billion compared to the prior year quarter, primarily reflecting $384 million of sales from the OfficeMax stub period, from the merger closing date to December 28.  Same-store sales decreased 4% primarily due to lower average order values and lower transaction counts, resulting from decreased store traffic.

Office Depot ended 2013 with a total of 1,912 retail stores in the North American Retail Division, made up of 1,089 Office Depot branded locations and 823 OfficeMax branded locations.  During the fourth quarter of 2013, the company closed 16 Office Depot stores and seven OfficeMax stores, and opened one store under each brand.

Business Solutions Division sales increased 54% to $1.2 billion in the quarter compared to the prior year period, primarily reflecting $422 million of sales from the OfficeMax stub period.

International Division sales increased 15% to $911 million in the quarter - an increase of 12% on a constant currency basis - compared to the prior year period, including $133 million of sales from the OfficeMax stub period.

Source: Retailing Today

Winter Weather Affects Macy's Fourth-Quarter Results

February 25, 2014

Despite an 11% profit increase in the fourth quarter, sales at Macy's missed forecasts as ongoing winter storms hurt the retailer's results in January.

Macy's reported net income of $811 million during the fourth quarter, up 5% from $730 million in the same period a year earlier.  Sales dropped 1.6% to $9.2 billion from $9.35 billion.  Analysts had expected a more modest decline to about $9.28 billion.  Same-store sales grew 1.4% for the quarter, less than the 2.5% projected by Wall Street.

During the full fiscal year, net income rose 19% to about $1.45 biooion.  Net sales totaled $27.93 million, up 0.9% from $27.69 million.  Same-store sales increased 1.9%.

Although same-store sales in November and December 2013 rose 3.6% due to strong holiday performance, a worse-than-expected post-holiday slump in January 2014 led to Macy's net sales loss for the quarter.  Macy's said severe weather resulted in 244 Macy's and Bloomingdale's stores across the country being shut down at some point during the month.

Macy's credited part of its net income growth to its ability to place more of the 2,500 employees who were laid off in January 2014 into new jobs than it had expected.  In addition, Macy's said its core business strategies, My Macy's localization, omnichannel integrationand magic selling, which are known by the acronym of M.O.M, helped drive profitability and will continue to do so in the future.

"As has been the case since we began implementing these strategies in the 2008/2009 period, our competitive advantage is in the unique combination of localization, omnichannel and enhanced customer engagement," said president, chairman and CEO Terry J. Lundrgen.  "Customers are able to shop for and buy the products that they want and prefer in our stores, via mobile devices and on computers in a shopping environment that delivers outstanding value and is supported with great service."

The company is reiterating its annual sales and earning guidance, initially provided January 8.  Same-store sales growth in fiscal 2014 is expected in the range of 2.5-3%.  Earnings of $4.40 to $.50 per share are expected in 2014.

The company also announced plans for new Macy's stores in Sarasota, Florida; Las Vegas; and the Bronx, New York, in fiscal 2014.  A new Bloomingdale's will open in Palo Alto, California, to replace an older store in the same shopping center.

Source: Retailing Today

Lowe's Delivers In Q4 Despite Severe Winter Weather

February 26, 2014

Severe winter weather was no match for Lowe's in the fourth quarter.  The company reported sales of $11.7 billion, up 5.6% from the same quarter last year, as comps increased 3.9%.  The company also posted fourth-quarter net earnings of $306 million, up 6.3%.

"During the quarter, we delivered solid performance in core home improvement categories, balancing softer sales of seasonal gifts and holiday decorations," said CEO Robert Niblock.  "When extreme winter weather arrived late in the quarter, our distribution network responded quickly and efficiently to move product where it was most needed."

For the full year, sales reached $53.4 billion, a 5.7% increase over 2012 sales.  Comps for the year finished at 4.8%, as net income surged 16.7% to $2.3 billion.

Looking ahead, Lowe's expects total sales for fiscal 2014 to increase about 5%, and comparable store sales to increase about 4%.  The company expects to open about 15 home improvement stores and five Orchard Supply hardware stores.

Niblock added that he was pleased with the progress Lowe's made during 2013 and that the retailer continues to "transform."

As of January 31, Lowe's operated 1,832 stores in the U.S., Canada and Mexico.

Source: Retailing Today

Calendar Shift Affects The Home Depot's Fourth Quarter

February 25, 2014

Although the Home Depot's overall sales missed analysts' expectations, the retailer said the calendar shift, which resulted in one fewer week in the fourth quarter compared to the prior year quarter, affected its results.

The world's largest home improvement retailer reported fourth quarter total sales of $17.7 billion, down 3% from the same quarter last year, which benefited from an extra week in the calendar.  On a 13 week basis, the company's sales actually increased 3.9%.

Comp-store sales in the quarter increased 4.4% company-wide and 4.9% in the United States.  Net earnings were $1.01 billion, down slightly from $1.02 billion a year ago.

For the full year, the company pointed to strong performances across the board.  Net sales increased 5.4% to $78.8 billion - excluding the 53rd week from the prior year, the increase was 7.2%.  Comp-store sales increased 6.8% for the company, and increased 7.5% for the U.S.

"In 2013, we posted our strongest comp sales growth in 14 years as solid execution and the recovering housing market aided our performance," said Frank Blake, CEO and chairman.

Looking ahead, the company expects sales growth of about 4.8% in 2014, with comp-store sales growth of about 4.6%.  The company's guidance also called for seven new stores.

Source: Retailing Today

Heavy Markdowns Hurt Dillard's In Q4

February 24, 2014

Dillard's CEO William T. Dillard II voiced disappointment in the retailer's gross margin performance despite what he called a profitable fourth quarter.  Although comparable sales gew 2%, the retailer said lower-than-expected sales necessitated heavy markdowns.

The company reported a net income of $119.1 million for the quarter and fiscal 2014, a 26% decline from $161.4 million for the same period a year earlier.  Net sales in the fourth quarter declined 3% to $2.03 billion from $2.1 billion.  During the fiscal year, net income dropped about 4% to $323.7 million from $336 million, and net sales slightly declined to $6.53 billion from $6.59 billion.  Same-store sales rose 1%.

Looking ahead, Dillard's plans to open two new stores in October 2014: a 200,000 sq. ft. location in The Shops at Summerlin in Las Vegas and a 180,000 sq. ft. location in The Mall at University Town Center in Sarasota, Florida.

Source: Retailing Today

Dillard's, Inc. Reports Fourth Quarter And Fiscal Year Results

February 24, 2014

Dillard's, Inc. announced operating results for the 13 and 52 weeks ended February 1, 2014, including record fiscal year earnings per share adjusted for certain items of $6.99 versus $6.33 in the prior year. 

Summary of the Company's Fourth Quarter Performance

• A 2% increase in comparable store sales
• Diluted earnings per share excluding certain items of $2.69 versus $2.87
• Retail gross margin decline of 180 basis points of sales
• Operating expense improvement of 90 basis points of sales

Fourth Quarter Results

Dillard's reported net income for the 13 week period ended February 1, 2014 of $119.1 million ($2.71 per share) compared to net income of $161.4 million ($3.36 per share) for the 14 weeks ended February 2, 2013.  Included in net income for the 13 week period ended February 1, 2014 is an after tax credit of $0.8 million ($0.02 per share) representing the reversal of asset impairment charges on a store held for sale.  Excluding this item, Dillard's would have reported $118.3 million ($2.69 per share) for the 13 week period ended February 1, 2014.

Included in net income for the prior year 14 week period ended February 2, 2013 is a net after-tax credit totaling $23.9 million ($.50 per share) comprised of the following items:

• a $6.8 million after-tax gain ($0.14 per share) related to the sale of a former retail store location
• after-tax asset impairment and store closing charges of $1.1 million ($0.02 per share)
• approximately $18.1 million ($0.38 per share) in tax benefit due to a one-time deduction related to dividends paid to the Dillard's, Inc. Investment and Employee Stock Ownership Plan

Excluding these items, Dillard's would have reported $137.6 million ($2.87 per share) for the 14 week period ended February 2, 2013.

Dillard's Chief Executive Officer, William T. Dillard, II, stated, "Although it was a profitable fourth quarter, we are disappointed in our gross margin performance, as lower than anticipated sales necessitated heavier markdowns.  We are pleased with our expense control as well as with our strong cash flow for the year."

Fiscal Year Results

Dillard's reported net income for the 52 week period ended February 1, 2014 of $323.7 million ($7.10 per share) compared to net income of $336.0 million ($6.87 per share for the 53 week period ended February 2, 2013.

Included in net income for the 52 week peroid ended February 1, 2014 is a net after-tax credit totaling $5.1 million ($0.11 per share) comprised of the following three items:

• A $7.6 million after-tax gain ($0.17 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 $3.5 million ($0.08 per share)

Excluding this credit, Dillard's would have reported net income of $318.6 million ($6.99 per share) for the 52 week period ended February 1, 2014, marking a record setting fiscal year earnings per share performance.

Included in net income for the prior year 53 week period ended February 2, 2013 is a net after-tax credit totaling $26.2 million ($0.54 per share) comprised of the following items:

• after-tax gains of $7.4 million ($0.15 per share) related to the sale of three former retail store locations
• after-tax asset impairment and store closing charges of $1.0 million ($0.02 per share)
• approximately $1.7 million ($0.03 per share) in tax benefit due to the reversal of a valuation allowance related to a deferred tax asset consisting of a capital loss carryforward
• approximately $18.1 million ($0.37 per share) in tax benefit due to a one-time deduction related to dividends paid to the Dillard's, Inc. Investment and Employee Stock Ownership Plan

Excluding these items, Dillard's would have reported $309.8 million ($6.33 per share) for the 53 week period ended February 2, 2013.

Net Sales - 13 Weeks

Total merchandise sales for the 13 week period ended February 1, 2014 were $2.013 billion and $2.087 billion for the 14 week period ended February 2, 2013.  Similar to many other retailers, the Company follows the retail 4-5-4 reporting calendar which included an extra week of operations in the fourth quarter of 2012.  Based upon comparable 13 week periods ended February 1, 2014 and February 2, 2013, total merchandise sales increased 1% and sales in comparable stores increased 2% for the fourth quarter.

Sales trends for the fourth quarter were strongest in ladies' accessories and lingerie followed by shoes.  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 ("CDI") for the 13 weeks ended February 1, 2014 were $2.034 billion and $2.106 billion for the 14 weeks ended February 2, 2013.

Net Sales - Fiscal Year

Total merchandise sales for the 52 week period ended February 1, 2014 were $6.439 billion and $6.489 billion for the 53 week period ended February 2, 2013.  Based upon comparable 52 week periods ended February 1, 2014 and February 2, 2013, total sales increased 1% and sales in comparable stores increased 1% for the fiscal year.

Net sales (including CDI) for the 52 weeks ended February 1, 2014 were $6.532 billion and $6.593 billion for the 53 weeks ended February 2, 2013.

Gross Margin/Inventory

Gross margin from retail operations (which excludes CDI) decreased 180 basis points of sales to 32.8% for the 13 weeks ended February 1, 2014 compared to 34.6% for the 14 weeks ended February 2, 2013.  The decline resulted from increased markdowns in response to lower than anticipated sales.  Consolidated gross margin for the 13 weeks ended February 1, 2014 decreased 180 basis points of sales to 32.6% from 34.4% during the 14 weeks ended February 2, 2013.

Gross margin from retail operations decreased 40 basis points of sales to 35.7% for the 52 weeks ended February 1, 2014 compared to 36.1% for the 53 weeks ended February 2, 2013.  Consolidated gross margin for the 52 weeks ended February 1, 2014 decreased 30 basis points of sales to 35.3% from 35.6% during the 53 weeks ended February 2, 2013.

Inventory increased 4% at February 1, 2014 compared to February 2, 2013.

Selling, General & Administrative Expenses

Selling, general and administrative expenses ("operating expenses") decreased 90 basis points of sales during the fourth quarter ended February 1, 2014.  Operating expenses were $439.2 million and $474.9 million for the 13 weeks ended February 1, 2014 and 14 weeks ended February 2, 2013, respectively.  The $35.7 million decline in operating expenses is primarily due to the additional week of operations in the prior year fourth quarter.

Operating expenses decreased 40 basis points of sales during the fiscal year ended February 1, 2014.  Operating expenses were $1632.0 million and $1671.5 million for the 52 weeks ended February 1, 2014 and 53 weeks ended February 2, 2013, respectively.

Share Repurchase

During the fiscal year ended February 1, 2014, the Company repurchased $301.6 million (3.9 million shares) of Class A Common Stock at an average price of $78.30 per share under the Company's share repurchase plan.  No shares were repurchased during the fourth quarter of 2013.  Remaining authorization under the share repurchase programs at February 1, 2014 was $290.4 million.

Total shares outstanding (Class A and Class B Common Stock) at February 1, 2014 and February 2, 2013 were 43.9 million and 47.8 million, respectively.

Store Information

During the fourth quarter of 2013, the Company closed its University Mall location in Chapel Hill, North Carolina (64,000 square feet), its Collin Creek Mall location in Plano, Texas (195,000 square feet) and its Twin Peaks Mall location in Longmont, Colorado (90,000 square feet).  The Company closed six locations during fiscal year 2013.

Dillard's plans to open two new stores in October of 2014:

• The Shops at Summerlin in Las Vegas, Nevada (200,000 square feet)
• The Mall at University Town Center, Sarasota, Florida (180,000 square feet)

At February 1, 2014, the Company operated 278 Dillard's locations and 18 clearance centers spanning 29 states and in Internet store at www.dillards.com.  Total square footage at February 1, 2014 was 50.5 million.

Source: Dillard's, Inc. Investor Relations

Record Year For CVS

February 11, 2014

CVS Caremark's fourth-quarter results came in at the high end of expectations and helped produce a record year; however, one of the key topics analysts discussed was the company's recent decision to stop selling tobacco products in all its stores by October 1.

"Last week we announced our decision to exit the tobacco category, a category that we believe is inconsistent with our growing role in the changing healthcare marketplace," Larry Merlo, president and CEO, told analysts.  "Simply put, this was the right decision at the right time.  There is a far greater focus emerging on health outcomes, managing chronic disease and reducing costs, and exiting the tobacco category more closely aligns us with the goals of patients, clients and providers, positioning our company for future growth."

Merlo made note of the overwhelmingly positive response across an array of key constituents, including customers, prospective and current clients, benefit consultants, legislators and policymakers, and public health and Medicaid officials.  "All of whom see the health benefits, as well as the role that pharmacy can play in advancing smoking cessation and better managing chronic disease," Merlo said.

As reported, the move is expected to result in a loss of approximately $2 billion in revenues on an annual basis from the tobacco shopper.  The $2 billion represents about 3% of earnings.

"When you look at that eight feet to ten feet that tobacco commands today, there will be something replacing that space, and to be clear, it is not going to make up $2 billion in revenues, but it will be something.  And there are some things that are being tested as we speak," Merlo said when asked about its plans at retail and the steps it would take to help offset some of the loss.

"We are seeing this tobacco decision as an opportunity to connect even more consumers as an expert in health and beauty and to build our loyalty with them.  As we focus specifically on the front store, it is really around driving what we will call 'smart growth' and I think ther it has three elements: taking ExtraCare to the next level, the second is focusing on our core strength in health and beauty, and the third is driving our store brand penetration," added Helena Foulkes, president of CVS/pharmacy.

During the quarterly call with analysts, Merlo also provided analysts with a broad-reaching business update including:

• The impact of the Affordable Care Act and the role CVS Caremark can play in serving new customers and supporting health plans.
• Its joint venture with Cardinal Health to form the largest generic sourcing entity in the United States.  The venture will help spur innovative purchasing strategies with generic manufacturers and is expected to be operational by July.
• The 2014 selling season, which has resulted in net-new wins of about $2 billion, excluding attrition in the Med D business.  Merlo said that while it is too early to provide an update on the 2015 selling season, the company is "well-positioned" to both retain business and gain share.
• The specialty pharmacy business, which posted a revenue increase of about 22% year over year.

Merlo added that the company expects to see significant growth in the specialty space and is well-positioned to capitalize on the opportunity.  Enter its acquisition in January of Coram, the specialty infusion services and enteral nutrition business unit of Apria Healthcare Group.

"This provides us with a new set of capabilities to manage not just the cost of infused drugs, but also to reduce the length of hospital stays and to help patients move from higher cost sites of service, like hospital outpatient centers, to more cost-effective locatons, such as the patient's home or a physician's office," Merlo said.

Furthermore, its new Specialty Connect offering is on schedule to roll out in 2014.  Analogous to the Maintenance Choice program, Specialty Connect integrates mail and retail capabilities to provide both greater choice and convenience for members.

CVS Caremark's MinuteClinic business posted a revenue increase of more than 10% during the quarter and reached a milestone with 800 total clinics in 28 states and Washington, D.C.

Net revenues for the three months ended December 31 increased 4.6%, or $1.4 billion to $32.8 billion, up from $31.4 billion the year-ago period.  For the year, total revenue rose 3% to $126.8 billion compared with $123.1 billion last year.

Revenues in the retail pharmacy segment increased 5.6% to $17.2 billion during the quarter.  Same-store sales rose 4%, with pharmacy same-store sales up 6.8%.  Front-end same-store sales decreased 1.9% due to softer traffic, which was partially offset by an increase in basket size, the company stated.  For the year, total revenue in the retail pharmacy segment rose 3.1% to $65.6 billion.  Same-store sales increased 1.7% for the year, with pharmacy same-store sales up 2.6% and front-end, same-store sales down 0.5%.

Income from continuing operations attributable to CVS Caremark for the three months increased 12.4% to $1.3 billion, compared with $1.1 billion in the year-ago period.  Adjusted earnings per share from continuing operations attributable to CVS Caremark for the three months ended December 31, 2013 and 2012 was $1.12 and $0.96 respectively, at the high end of guidance.

Income from continuing operations attributable to CVS Caremark for the year increased 18.8% to $4.6 billion.  Excluding a gain from a legal settlement and the loss on early extinguishment of debt, adjusted EPS increased 15.7% in 2013 to $3.96, at the high end of guidance.

"I'm very pleased with our fourth-quarter results, with adjusted earnings per share coming in at the high end of our guidance at $1.12 per share, capping off a terrific year," Merlo said.  "For full year 2013, we delivered strong growth in revenues, gross margins, operating margins and earnings across the CVS Caremark enterprise."

Source: Retailing Today

Weak Sales At Walmart, Profit Outlook Lowered

January 31, 2014

Bad weather and a reduction in food stamps led to weaker-than-expected sales at Walmart and Sam's Club, which combined with greater-than-expected international expense, prompted an uncharacteristic pre-announcement from the company that fourth quarter profits would be worse than expected.

Walmart said its earnings per share adjusted to exclude several non-recurring and greater-than-expected expenses related to international operations would be below the low end of a previously provided forecast of $1.60 to $1.70 and full year earnings per share would be below earlier guidance in the range of $5.11 to $5.21.

The earnings miss for the quarterly period ended January 31 was attributed to a number of factors.  In the U.S., same-store sales at Walmart stores ad Sam's Club are both expected to be slightly negative, according to Walmart CFO Charles Holley, compared to earlier guidance which called for comps at Walmart to be roughly flat and comps at Sam's in the range of flat to 2%.

"Despite a holiday season that delivered positive comps, two factors contributed to lower comp sales performance for the 14-week period for Walmart U.S.," Holley said.  "First, the sales impact from the reduction in SNAP (the U.S. government Supplemental Nutrition Assistance Program) benefits that went into effect November 1 is greater than we expected.  And, second, eight named winter storms resulted in store closures that impacted traffic throughout the quarter.  Sam's Club was also impacted by the weather throughout the quarter."

The pre-announcement by Walmart is unfamiliar territory for a company accustomed to meeting or exceeding its forecasts.  It also marks an inauspicious beginning to a new leadership era at the world's largest retailer.  Walmart International president and CEO Doug McMillon assumes the role of president and CEO of Walmart Stores on February 1 when current president and CEO Mike Duke steps down.

Walmart is scheduled to report fourth-quarter results on February 20.

 Source: Retailing Today

Lowe's Stumbles In Second Quarter

Lowe's posted declines in net sales, comp-store sales and earnings in the second quarter ended August 3. 

"Our results fell short of our overall expectations," said Robert Niblock, Lowe's chairman, president and CEO.  "However, I have confidence in our strategy and in our employees, and while we recognize the significant magnitude of change that we've asked the organization to absorb as we transform our business, we fully understand that we must improve our level of execution." 

The world's second largest home improvement retailer posted sales of $14.2 billion in the quarter, down 2.0% from $14.5 billion in the same quarter last year.  Comp-store sales in the quarter were negative 0.4%.  Earnings of $747 million were down 10.0% from the same quarter a year ago.

The quarterly comparisons in 2012, which is a 52 week year, are impacted by a shift in comparable weeks.  For the six month period, comparable store sales increased 1.0%.

Currently, Lowe's operates 1,748 stores in the United States, Canada and Mexico, with 196.8 million square feet of retail selling space.  That compares with rival Home Depot's store count of 2,255 stores.  Last week, Home Depot reported gains in comps and sales and a double digit percentage gain in net earnings.  

See related article: http://www.acceleratedanalytics.com/blog/2012/8/15/earnings-jump-124-at-home-depot.html 

Source:  retailingtoday.com

Earnings Jump 12.4% At Home Depot

Home Depot reported sales of $20.6 billion for the second quarter of 2012, a 1.7% increase from the second quarter of fiscal 2011.  Comparable sales for U.S. stores were positive 2.6%, and overall same-store sales for the second quarter were positive 2.1%.

Net earnings for the world's largest home improvement retailer were $1.53 billion for the second quarter, which ended July 29.  This compares with net earnings of $1.36 billion in the same period a year ago, reflecting a 12.4% increase.

"As expected, second quarter sales reflected the pull forward of seasonal activity into the first quarter," said Frank Blake, chairman and CEO.  "But we saw continued demand for core products and delivered second quarter earnings above our expectations."

The Atlanta retailer expects fiscal 2012 sales will increase approximately 4.6% from the prior year on a 53 week basis.

At the end of the second quarter, Home Depot operated a total of 2,255 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces, Mexico and Canada.

Source:  retailingtoday.com

Tractor Supply Plows Ahead

Despite a stagnant economy and drought conditions across large parts of the country, Brentwood, Tenn.-based Tractor Supply Co. reported sales and earnings growth.

The company posted second-quarter sales of $1.29 billion, up 9.6% from $1.18 billion in the same quarter last year.

The nation’s largest chain of farm and ranch specialty stores posted earnings of $106.6 million, up 8.3% from $91.2 million in the year-ago period.

"We are pleased with our ability to generate double-digit EPS growth during the second quarter, while operating in a stagnant economy and navigating weather shifts and unfavorable drought conditions,” said Jim Wright, chairman and CEO.

The company opened 18 new stores compared to 16 new store openings in the prior year's second quarter. The company operates 1,135 stores in 45 states.

Same-store sales increased 3.2%, even as the early spring weather pulled sales out of the second quarter and into the first quarter, according to the company.

The impact of the drought across much of the middle of the country appears to have affected farmers much more than it has affected the farm and ranch retailer.

"Our team is actively managing the product assortment to meet customer needs in the affected markets as the drought continues to spread and intensify," said Wright.

Source: retailingtoday.com

Home Depot looks to build customer relationships, shareholder value

Ahead of its investor and analyst conference, Home Depot has provided an update on its strategic priorities and long-term financial targets.

Home Depot's strategic goals include creating a stronger connection with customers and simplifying its business, improving merchandise assortment and value, improving shareholder value,and developing a competitive platform across all commerce channels.

"The Home Depot has a strong foundation of customer service, product authority and value creation. We will continue to build on our strategic priorities as we look to 2015 and beyond," said Frank Blake, chairman and CEO.

Home Depot said it still expects sales to be up approximately 4.6% for the year and diluted earnings per share to be up approximately 17% to $2.90 for the year. In addition, the company updated its fiscal year 2012 share repurchase guidance and now expects share repurchases of approximately $4 billion. This is an increase of $500 million from the guidance provided in May 2012, but given the timing of the share repurchases, the increase will not have a material impact to diluted earnings per share for fiscal 2012. 

In June of 2009, the company announced a long term operating target of a 10% operating profit and 15% return on invested capital. The company anticipates achieving this target by fiscal year end and has now set out a new long term, fiscal 2015, operating target of a 12% operting margin and 24% return on invested capital.

Source: retailingtoday.com

Lowe’s reports sales, earnings gains on warmer weather

Lowe’s reported net earnings of $527 million for the quarter ended May 4, a 14.3% increase over the same period a year ago.  Sales for the quarter increased 7.9% to $13.2 billion, from $12.2 billion in the first quarter of 2011.  Comparable-store sales for the quarter increased 2.6%, while comparable-store sales for the U.S. business increased 2.7%.

“We delivered solid results for the quarter, consistent with our expectation at the beginning of the year,” said Robert A. Niblock, Lowe’s chairman, president and CEO. “While we capitalized on better than anticipated weather during most of the quarter, demand for seasonal products slowed toward the end.”

Lowe’s results follow a few days after its rival Home Depot announced first quarter sales and earnings increases of 5.9% and 27.5%, respectively.  Included in the results is a charge related to a previously announced reduction in staff at U.S. headquarters. This charge reduced pre-tax earnings for the first quarter by $17 million.

“We continue to maintain a cautious view of the housing and macro demand environment, and are focused on what we can control,” Niblock added. “We are building on our core strengths and strategically investing in ways that will better position Lowe’s for success. I would like to express my gratitude to our employees for their continued dedication and customer focus.”

Lowe’s operates 1,747 stores in the United States, Canada and Mexico representing 196.7 million square feet of retail selling space.

Source:  retailingtoday.com

Walmart Q1 comps gain 2.6%

First quarter profits at Walmart exceeded analysts’ estimates, as same-store sales increased 2.6%, and the company said its strategy of low prices on a broad merchandise assortment is resonating again with shoppers.

Sales for the quarter increased 8.6% to $112.3 billion, compared with $103.4 billion in the first quarter last year. The results would have been even stronger, except for an approximately $800 million headwind related to a negative currency exchange rate. Earnings per share of $1.09 were a nickel ahead of analysts’ estimates and three cents higher than the top end of the company’s guidance of $1.01 to $1.06.

“Our overall performance reflects the success of Walmart’s business model: driving the productivity loop, leveraging expenses and investing in price leadership,” said Wal-Mart Stores president and CEO Mike Duke. “We believe that the momentum throughout our business positions us very well for the rest of the year.”

Strength was evident across all three of the company’s business segments, but it was the performance of the U.S. group that stood out, thanks to a 2.6% same store sales increase that exceed the company’s flat to 2% guidance range and marked the third consecutive quarter of U.S. comp improvement. Total U.S. sales increased 5.9% to $66.3 billion.

“In a highly competitive retail environment, Walmart U.S. is increasing price separation across categories and driving increased traffic to both the grocery and general merchandise areas of our stores,” Duke said.

Source: retailingtoday.com

Home Depot Lawn Products Are Golden In Q1

Home Depot saw comp-store sales increase 5.8% in the first quarter of strong sales and earnings growth.  Home Depot’s Craig Menear, EVP merchandising, shared details and data from a first quarter that saw double-digit comps in certain seasonal product categories.  A long list of products were described as double-digit comp generators, including walk-behind mowers, riding mowers, lawn accessories, soils and mulches. “Warmer than expected weather allowed customers to complete exterior projects and begin spring projects early,” he said, estimating a 300 basis point boost for U.S. comps due to the weather.  “The core of the store continues to perform,” Menear said.  Stores are also seeing recovery of the pro business, which historically account for about 30% of the company’s overall sales.

Source:  retailingtoday.com

Kohl's earnings slip, comps up in Q1

Despite dropping from the previous year, Kohl's said its net income for the first quarter ended April 28 was in line with its expectations. The company reported net income of $154 million (63 cents per diluted share) compared with $201 million ($0.69 per diluted share) a year ago. Net sales were $4.2 billion, an increase of 1.9% for the quarter. Comparable-store sales for the quarter increased 0.2 percent.

Kevin Mansell, Kohl’s chairman, president and CEO, said, “Our first quarter results reflect the implementation of our strategy to initiate lower pricing in order to provide greater value to our customers. This planned action led to significantly lower gross margins for the quarter. Strong management of expenses allowed us to achieve our earnings goal for the quarter. We have accelerated new receipts into second quarter to ensure we are well-positioned from an inventory perspective for the back-to-school season. The combination of these two actions should allow us to greatly improve our sales for the fall season.”

Kohl's ended the quarter with 1,134 stores in 49 states, compared with 1,097 stores at the same time last year. The company opened nine new stores, including one relocated store, and closed one store during the quarter.  Plans are to open approximately 10 more stores in the fall season and to remodel approximately 50 stores in 2012.

For the second quarter, Kohl's expects earnings to range from 96 cents to $1.02 per diluted share. The guidance is based on total sales growth of 2% to 3% and comparable-store sales growth of flat to 1% and includes expected second quarter share repurchases of $250 million. The company maintains its previously announced fiscal 2012 guidance of $4.75 per diluted share.

Source: retailingtoday.com