Ronnie, I'm not sure when WMT releases earnings. But here's a good article that discusses holiday earnings:
=Inventory Control Was Key In FY98 For Major Retailers
Dow Jones News Service via Dow Jones
By Philana Patterson
NEW YORK (Dow Jones)--Consumers didn't empty their wallets until after holiday
markdowns began, but good inventory control should help major retailers report
solid earnings for the fourth quarter and the year, analysts said.
January sales turned out more robust than expected for many chains. However,
January is typically considered a clearance month when retailers work to get rid
of old winter merchandise to make room for spring goods. Because so many items
are marked down, profit margins begin to be eroded, leaving analysts with few
hopes for better-than-expected earnings surprises.
PaineWebber Inc. analyst Jeffrey Edelman said that, for the most part, Wall
Street earnings estimates are probably on target for major retailers.
Analysts agree that good inventory management made a difference for some
department stores as they dealt with changing customer tastes and buying
patterns.
"Inventories were in much better shape going into Christmas than they were a
year ago," said Merrill Lynch & Co. analyst Daniel Barry.
Retailers' earnings may also benefit from lower-than- budgeted last-in,
first-out, or LIFO, charges, Barry said. LIFO refers to the inventory valuation
system whereby the price shown on the last incoming shipment of a particular
item is the one used for current valuations and cost.
In fiscal 1998, discounters continued to attract value-conscious consumers,
analysts said. The minimum wage also hike helped the segment as workers spent
their raises, noted NationsBanc Montgomery Securities Inc. analyst Tom Tashjian.
High-end retailers benefited from consumers' fatter incomes, created largely
by investors' gains in the bullish stock market, analysts said. The tony
department stores lured shoppers by offering a more unique shopping experience,
Tashjian said.
"It's not just a bunch of rich people buying expensive stuff," Tashjian said.
After seeing sales lag in earlier in the year, Saks Holdings Inc.'s (SKS)
efforts to make its stores look less like mainstream department stores are
paying off. In recent months, Saks has benefited from upgrading merchandise to a
selection that's "semi-exclusive," Tashjian said.
"(Saks made) structural changes so that people will see something different
than when they go to Bloomingdale's or Macy's," Tashjian said.
The First Call Corp. consensus expects Saks to report net income for the
fourth quarter ended in February of 61 cents a share, compared with 73 cents a
share in the year-ago quarter. For the year, the consensus expects Saks to earn
89 cents a share, compared with 75 cents a year earlier.
Despite pre-announcing lower-than-expected earnings because of high inventory
levels, which led to heavy markdowns after Christmas, Nordstrom Inc. (NOBE) is
expected to report a strong earnings jump. For the fourth quarter ended in
January, the First Call consensus expects Nordstrom to report net income of 74
cents a share, compared with 53 cents a share a year ago. For the year, the
consensus expects Nordstrom to report net income of $2.37 a share, compared with
$1.82 a share a year earlier.
Tashjian said that in all fairness to Nordstrom, the current earnings estimate
for the company "isn't bad."
"Folks wanted the turnaround, which is clearly under way, to happen faster,"
Tashjian said.
In 1997, Wal-Mart Stores Inc. (WMT) continued to "block and tackle and gain market share," said Lehman Brothers Inc. analyst Jeffrey Feiner. The First Call consensus expects Wal-Mart to report fourth-quarter net income of 55 cents a share, compared with 48 cents a year earlier. For the year, Wal-Mart is expected to earn $1.54 a share, compared with $1.33 a year earlier.
Kmart Corp. (KM) ended the year with less markdown activity, Feiner said.
However, the company struggled through much of the year with high costs and
women's apparel that shoppers rebuffed. The First Call consensus expects the
company to report net income for the fourth quarter ended in January of 46 cents
a share, compared with 45 cents a year earlier. The consensus expects the
retailer to report net income of 61 cents a share for the year, compared with 48
cents a year earlier.
Dayton Hudson Corp.'s (DH) Target discount stores division led the way for the
company through the year, analysts said. Its Mervyn's and department-store
division also saw increasing strength as the year progressed. The First Call
consensus expects Dayton Hudson to report net income for the fourth quarter
ended in February of $1.46 a share, compared with 96 cents. The previous fourth
quarter included a pretax charge of 35 cents a share, for real estate
repositioning. Before the charges, Dayton Hudson had fourth-quarter earnings of
$1.27 a diluted share. For the year, the consensus expects Dayton Hudson to
report net income of $3.25 a share, compared with $1.95 a share a year earlier;
before charges, the company earned $2.35 a diluted share.
J.C. Penney Stores Co. (JCP) did a good job of clearing inventory after the
holidays and is going into the spring in a good position inventory-wise,
analysts said. In the fourth quarter, the company announced that it would close
75 department stores and lay off 5% of its management ranks to cut
administrative costs. The company will take a charge of about $140 million in
the quarter.
For the fourth quarter ended in January, J.C. Penney is expected to report net
income of $1.33 a share, compared with 36 cents a share a year earlier. The
previous fourth quarter included nonrecurring charges of 84 cents a share
related to the integration of drugstore acquisitions. Before the charges,
earnings from operations were $1.20 a share. The First Call consensus expects
J.C. Penney to report net income of $3.10 a share for the year, compared with
$2.25 a share in the previous year. Before charges, earnings from operations
were $3.17 a share.
Despite modest same-store sale increases through the year, many middle-market
department stores were able to keep margins intact by controlling inventories
and costs, analysts said.
Federated Department Stores Inc. (FD) continued to keep expenses and
inventories in check, which helped when sales weren't robust. The First Call
consensus expects the company to report net income for the fourth quarter ended
in February of $1.65 a share, compared with $1.39 a share a year earlier.
Excluding business integration and consolidation expenses, year-ago net income
was $1.65 a share. For the year, First Call expects Federated to report net
income of $2.56 a share, compared with $1.28 a share a year earlier. Excluding
business integration and consolidation expenses, year-earlier net income was
$2.18 a share.
May Department Stores Co. (MAY), like other retailers, saw weak traffic before
Christmas. When sales picked up after Christmas, the retailer had such
well-controlled inventories that it wasn't forced to take deep markdowns,
analysts said.
The First Call consensus expects May to report net income for the fourth
quarter ended in February of $1.75 a share, compared with $1.61 a share a year
earlier. The consensus expects May to report net income of $3.07 for the year,
compared with $2.86 a share a year earlier.
-By Philana Patterson; 201-938-5360 |
