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Lowering the Sales

Gap falls short of already-lowered expectations

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Gap Inc. (San Francisco) announced that second quarter earnings for the second quarter fell short of forecasts – a forecast the retailer had already lowered last month in the face of sales declines.

Per-share earnings for the quarter ended July 29 will be 2-3 cents short of the estimated 23-cent average that was predicted. The original forecast of 26 cents a share was first lowered when The Gap told analysts that sales were declining across the board – in The Gap, Old Navy and Banana Republic chains – and prices were being slashed to clear out spring and summer inventory. In the most recent report, sales at stores open a year fell 1 percent in July; Banana Republic sales were virtually unchanged but Old Navy sales fell. A year ago, same-store sales gained 2 percent.

Not all retailers were reporting bad news, however. In other quarterly, and monthly, sales reports:

Target Corp.(Minneapolis) reported a 9 percent increase in net retail sales for the four weeks ended July 29, 2000, to $1.9 billion. Comparable-store sales increased 3.7 percent from the same period a year ago. “Sales at Target Corp. were slightly better than plan for the month of July,” said Bob Ulrich, chairman and ceo.

Wal-Mart Stores, Inc. (Bentonville, Ark.) reported a 23.5 percent increase in net sales for the four-week period ended July 28, 2000. Sales for the 26-week period just ended also increased, by 23 percent, to $90.5 billion. Sam's Clubs sales for the four-week period were up 10.0 percent.

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Kmart Corp. (Troy, Mich.) reported that quarterly July consolidated sales were $8.998 billion, up 2.5 percent from the same period in 1999. On a comparable store basis, consolidated sales rose 0.7 percent for the quarter.

Sears, Roebuck and Co. (Hoffman Estates, Ill.) announced an increase in total domestic store revenues for the four weeks ending July 29, 2000 of 1.8 percent. “We are pleased by the performance of our hardlines business and the improvements in our apparel business, which showed a slight increase for themonth,” said chairman and ceo Arthur C. Martinez. “Our appliance sales, which have been strong throughout the year, were impacted by slower air conditioner sales due to dramatically cooler weather compared to unusually high temperatures last July.” The company's specialty stores – Sears Hardware, Sears Auto Center stores and The Great Indoors stores (which opened its newest store in the Dallas area) – showed strong increases for the month.

Federated Department Stores (Cincinnati) reported a total sales increase of 1.4 for the quarter and 1.6 for the month, and same-store sales increases of 1.9 percent for the quarter and 1.6 for the month.

The May Department Stores Co. (St. Louis) reported preliminary net retail sales increases of 1.7 percent for the month ended July 29, 2000, though same-store sales decreased 1.6%. Sales for the first six months of fiscal 2000 were up 3 percent. (Sales exclude the sales of stores that have been closed and not replacedand include lease department sales.) During July, May opened a new Foley's store at the Stonebriar Center in Frisco, Texas, and has already opened 15 of its 23 new stores planned for the year. (The eight stores remaining to open this year include three Lord & Taylor stores, three Foley's stores, one Kaufmann's store and one Famous-Barr store.)

Venator Group, Inc. (New York) reported an increase of 10.1 percent for the 13-week period just ended. (If you exclude the effect of foreign currency fluctuations, the total sales increase was 11.4 percent.) Comparable store sales for its Athletic Group (Foot Locker, Lady Foot Locker, Kids Foot Locker and Champs Sports) rose 11.4 percent, while the Northern Group of apparel stores increased 2 percent for the period. For the 26 weeks ended July 29, 2000, sales increased 11.6 percent, to $2,086 million, and comparable store sales increased 12 percent. “We continue to be very encouraged by the comparable store sales growth from all our athletic businesses and are well positioned for the second half of the year,” stated Dale W. Hilpert, Venator Group's chairman and ceo.

J CPenney Co., Inc. (Plano, Texas), in anticipation of greeting its new ceo, Allen Questrom, announced a modest total sales gain of 0.8 percent for the four weeks ended July 29, 2000. Department store sales for July decreased 4.1 percent and same-store sales decreased 3.6 percent, but catalog sales for July increased 4.6 percent, and sales of jcpenney.com continue to grow rapidly – to $15 million in July and $94 million year-to-date compared to $3 million and $15 million last year. Also, total drugstore sales for the July period increased 4.8 percent, and same-store sales increased 9.8 percent, led by a 14.6 percent increase in pharmacy sales. For the quarter, department stores were down slightly, but Eckerd drugstores were up about 5 percent, and the other categories – catalog and direct marketing services – were also up.

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RadioShack Corp. (Fort Worth, Texas) reported an increase in total sales from its retail division,including sales to its dealer/franchise stores, of 13 percent for July, and same-store sales increases of 12 percent – “the second double-digit month in a row, coming on top of last year's 17 percent gain,” noted chairman and ceo Leonard Roberts “Digital products remained hot, with wireless communications, computers and audio video products showing the strongest increases. Our new alliance with VerizonWireless, coupled with the upcoming roll-out of the Microsoft Internet Center @ RadioShack, gives us significant advantages in the all-important upcoming fourth quarter.” Year-to-date, total sales are up 14 percent and same-store sales up 11 percent.

The Limited, Inc. (Columbus, Ohio) reported a comparable store sales increase of 5 percent for thefour weeks ended July 29, 2000. Excluding sales from Galyan's and The Limited Too in 1999, sales increased 7 percent. ( Too, Inc. split from The Limited, Inc. after its Aug. 23, 1999 spin-off, and a majority interest in Galyan's was purchased by a third party on Aug. 31, 1999.) The Limited reported a comparable stores sales increase of 7 percent for the 26 weeks ended July 29, 2000 (8 percent excluding the other two properties).

Abercrombie & Fitch (Reynoldsville, Ohio) – another former Limited property now out on its own -reported a 22 percent net sales increase net sales for the month, though same-store sales decreased 2 percent. Year-to-date, the company reported a 13 percent net sales increase, but a 7 percent same-stores decrease. However, due to better-than-expected July performance, the company now projects that second quarter earnings will exceed the previously announced guidance of $0.16 – $0.18 per share. (They will announce second quarter earnings results on Tuesday, August 8.)

Restoration Hardware, Inc. (Corte Madera, Calif.) announced an increase in quarterly net sales of 32.1 percent, though same-store sales went up just 0.8% over the prior year. At the end of the period, 66 stores were included in the comparable store sales base. The retailer will open its 100th store this month, at FlatIron Crossing in Broomfield, Colo. During the second quarter, the company opened two stores, at Renaissance Place in Highland Park, Ill. and at Utica Square in Tulsa, Okla. The company anticipates opening an additional eight stores before November 2000.

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