Retailers' results top Wall Street estimates
ANNE D'INNOCENZIO
NEW YORK - Target Corp. and Home Depot Inc. on Tuesday posted lower profits that still topped Wall Street expectations, but economic worries are likely to keep shoppers tight-fisted in the months ahead, executives predicted.
The results at two other retailers strongly reflected the recession's effects. Discounter TJX Cos., which operates T.J. Maxx, Marshalls and HomeGoods stores, saw profit rise 31 percent.
And luxury merchant Saks Inc. saw its loss widen, though still coming in smaller than analysts feared because of a series of cost-cutting moves.
During the recession, discounters have benefited from consumer cutbacks, while luxury retailers have seen demand evaporate.
Minneapolis-based Target's earnings were helped by higher profit margins on the items it sold and a stabilizing credit-card business.
Target earned $594 million, or 79 cents per share, in the three-month period ended Aug. 1. That compares with $634 million, or 82 cents per share, in the year-ago period.
Total revenue fell 2.6 percent to $15.07 billion. Analysts projected a profit of 66 cents per share on revenues of $15.1 million.
The results helped drive shares of Target up $2.39, or 5.8 percent, to $43.60 in morning trading.
"Second-quarter earnings were stronger than expected due to very strong operating margin in our retail segment and credit card segment performance in line with expectations," Gregg Steinhafel, chairman, president and CEO, said in a statement.
He added that the company is focused on initiatives to drive customer traffic and sales.
Profit from the credit card business dropped to $63 million for the quarter from $74 million in the year-ago period. Net write-offs in the quarter were $304 million, in line with company expectations.
Target sold 47 percent of its credit card receivables to JPMorgan Chase in May 2008.
Discounters retailers
Discounters, particularly Wal-Mart Stores Inc., have benefited from consumers switching to cheaper stores and focusing on necessities. But at Target, where more than 40 percent of revenue comes from nonessentials like funky jeans and bedspreads, the cheap-chic formula that once was its strength has became a drag as shoppers focus on basics.
A beneficiary of that was TJX, whose fiscal second-quarter profit rose 31 percent to $261.6 million, or 61 cents per share. The results beat Wall Street's expectations by 1 cent per share.
Sales for the period ended Aug. 1 rose 4 percent to $4.75 billion, meeting analysts' estimates. Consolidated same-store sales increased 4 percent.
CEO Carol Meyrowitz said in a news release the company's stores are seeing increased customer traffic and it is seeing strength across its businesses.
TJX's shares fell $1.26, or more than 3 percent, to $34.12 in morning trading.
Luxury retailers
Saks said it lost $54.5 million, or 39 cents per share, in the three months that ended Aug. 1. That compares with a loss of $32.7 million, or 24 cents per share, a year earlier.
Analysts had forecast a loss of 52 cents per share on revenue of $563 million. Revenue fell 15 percent to $561.7 million. Same-store sales also fell 15 percent during the quarter.
Luxury retailers like Saks have been especially hurt by the recession, as even shoppers with money to spend are cutting back on splurges.
Shares rose 4 cents to $5.40 in morning trading.