SHLD

Housing Market Strength Propels Home Depot

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Thanks to strength in the US housing market, home improvement giant Home Depot (click ticker for report: ) posted terrific third quarter results this morning. Revenues grew 4.6% year-over-year to $18.1 billion, easily exceeding consensus estimates. Earnings, excluding the closing of some unproductive stores in China, increased 23% year-over-year to $0.74 per share. Increased productivity helped tremendously, as aggregate same-store sales grew 4.2% year-over-year, and US same-store sales increased 4.3% year-over-year, driven by higher average tickets and more transactions. Gross margins ticked up about 20 basis points year-over-year to 34.6%, reflecting the higher average ticket prices and better appliance sales. Appliance sales are a good indicator of consumer confidence in the housing market, in our view. Management noted that credit … Read more

JC Penney’s Strategy Change Was and Is Necessary

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Department store chain JC Penney (click ticker for report: ) and its CEO Ron Johnson have been under tremendous scrutiny since Johnson took the reins in November of 2011. Johnson, independently wealthy from his days leading the retail push at Apple, came in looking to revamp the retailer and ignore the Street in the process. Sales declines have been staggering; same-store sales fell 26.1% during the third quarter and internet sales, in a secular uptrend, declined 37%, leading to a 26.6% decline in total sales. Earnings, on a non-GAAP basis, fell from $0.18 per share to a loss of $0.93 per share. The company also generated negative $389 million in free cash flow, though the majority was due to cash … Read more

Kohl’s Should be Thanking JCP

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Thursday morning, Wisconsin-based department store Kohl’s (click ticker for repot: ) reported mediocre third quarter results. The retailer grew sales 2.6% year-over-year to $4.5 billion driven by 1.1% same-store sales growth. Earnings grew 14% year-over-year to $0.91 per share, exceeding consensus estimate by a few pennies. While earnings were better than expected, the earnings per share growth was due to share buybacks and modest operating leverage rather expanding gross margins. Kohl’s shrunk its share count 11% since the same period in 2011. Gross margins dipped 44 basis points year-over-year to 38.1%, and management noted that the firm has been highly promotional, leading to lower earnings. We’re also skeptical about the company’s inventory build, which now stands at $4.8 billion, 17% … Read more

Macy’s Posts Strong Earnings; Provides Bold Fourth Quarter Sales Outlook

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Department store retailer Macy’s (click ticker for report: ) reported solid third quarter results Wednesday morning. Sales increased 3.8% year-over-year during the quarter to $6.1 billion, roughly in-line with consensus expectations. Earnings rose 12.5% year-over-year to $0.36 per share, exceeding consensus estimates. As we discovered earlier this week, revenue was driven higher by a 3.7% increase in same-store sales, as well as continued strong performance from macys.com and bloomingdales.com, which grew a combined 40% year-over-year. Men’s tailored clothing, men’s shoes, women’s suits, handbags, furniture, and watches were all cited as strong performers, with juniors, tabletops, and housewares lagging. Most areas were consistent with broader trends we’ve seen across retail as of late; men continue to return to a more formal, … Read more