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The missing middle class was on display on Thursday as retail earnings showed growth at both the high and low ends of the shopping spectrum.
Shares in Williams-Sonoma, an upmarket lifestyle retailer, gained nearly 4 per cent on an earnings beat. Likewise, shares in Dollar General, the discount retailer of everyday items, jumped as much as 2.5 per cent after beating estimates for sales growth.
Both retailers performed well during the holiday shopping season. Williams-Sonoma chief Laura Alber said it was “one of the best” for the company, which has been hit by slower consumer spending and rising competition, forcing it to repeatedly trim the top end of its full year sales and earnings forecasts in recent quarters.
The owner of West Elm and Pottery Barn reported earnings of $145m, or $1.63 a share, in the three months to end of January, compared with $141m, or $1.55 a share, in the prior year period.
Higher margins on the merchandise and supply chain efficiencies drove earnings, while sales fell slightly to $1.582bn, compared with $1.586bn a year ago as growth at its kitchen retail chain William Sonoma and West Elm furniture stores helped offset some of the sales slide at Pottery Barn.
“From an operational perspective, we executed one of our best holiday seasons and delivered an improved customer experience, which is at the center of everything we do,” Ms Alber said. “Entering 2017, we will continue to improve performance and increase our competitive advantage, with a focus on innovation in e-commerce, our products and service and the retail experience.”
At Dollar General, where the focus is on items $10 or less, declines in foot traffic moderated in the fourth quarter. Lower discretionary spending has plagued the retailer but as consumer confidence picks up, sales at the national chain have increased.
The company reported earnings ahead of expectations at $414m, or $1.49 a share for the quarter to February 3, compared with $376m, or $1.30 a share, in the period one year ago. Meanwhile, same-store sales, a key industry metric, grew 0.9 per cent, as net sales across the company also grew.
Revenue increased 13.7 per cent to $6.01bn, ahead of expectations for $5.96bn.
Not all retailers shared in a profitable quarter, or are expecting growth in the next quarter however. Shares in Guess fell 11 per cent, their biggest decline in a year, after the apparel maker lowered its guidance for the first quarter of 2017.
Lower foot traffic has plagued the middle-market apparel brand, which has been closing stores and negotiating for rent reductions.
The company expects a loss in the range of 33 to 30 cents per share in the next quarter. It reported an 86 per cent decrease in fourth quarter earnings to just $6.6m, from $47.8m in the period one year ago.