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Pain isn’t being felt evenly across the retail sector.
Underscoring the diverging fortunes in the industry, clothing retailer Express was hammered Wednesday morning after it reported a 13 per cent decrease in like-for-like sales during the most recent quarter, while specialty children’s shop Children’s Place was sitting pretty thanks to a strong showing over the same period.
Express — which peddles men’s and women’s clothing and is a fixture of American malls — saw its shares tumble almost 13 per cent after it said like-for-like sales, a key industry metric, fall 13 per cent during the three-month period ending January 28, compared to a 4 per cent rise during the same time last year. Net sales fell 11 per cent compared to a year earlier, to $678.8m, while net income was down nearly 60 per cent from a year ago at $22.8m, translating to earnings per diluted share of 29 cents.
The company’s chief executive, David Kornberg, blamed challenging mall traffic, heavy promotional activity and changing consumer preferences for its dismal results, adding that the company hoped to turn around its fortunes in the coming year by boosting “fashion clarity” through streamlined and new offerings, among other tactics. Its guidance for the first quarter of 2017 does not reflect the same optimism, projecting a like-for-like sales fall in the high single digit range, and net income to either stay flat or post a loss as deep as $3m.
But it’s not all doom and gloom, and specialty retailers that focus on a particular niche have been seeing a pick-up where their more generalised counterparts have fallen.
Children’s Place, which bills itself as the “largest pure-play children’s specialty apparel retailers”, is among them. On Wednesday, its shares were up more than 15 per cent after it reported a nearly 7 per cent jump in like-for-like sales over the quarter ending January 28 and a 114 per cent rise in net income, to $34.2m, or $1.86 per diluted share.
Also on Wednesday, the company announced it was doubling its quarterly dividend to 40 cents a share and authorising a new $250m share buyback programme. It also projected a like-for-like sales increase in the low single digits for the first quarter of the new year.
Unlike Express, which kept its store count relatively flat over the past year, Children’s Place has been tightening its belt, saying that it had closed 22 stores during the past quarter and opening none, bringing its store and square footage down 2.4 per cent over 2016. It says it is targeting even more closures over the coming year.
The differing tracks reflect the divide within the broader retail industry, as changes in consumer preferences and shopping habits forces companies to recalibrate.
Moody’s analysts said in a report last year that home improvement, dollar and off-price stores and specialty retailers were best positioned to capitalise on growing consumer confidence and wages in 2017, while department stores and apparel and footwear stores are among those most likely to suffer from a stronger dollar, declining mall traffic and a shift to online shopping.
That’s been reflected in several rounds of results so far this earnings season, with specialty home-improvement stores like Lowe’s and Home Depot posting better-than-expected sales while department stores like Macy’s and L Brands’ Victoria’s Secret released dim forecasts following a disappointing holiday season.