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Ace gains on income with minimal movement on revenue

BY HBSDealer Staff

Ace Hardware reported a slight increase in revenue during the first quarter, as well as more substantial progress in net income.

Revenue came in at $1.2 billion, up 0.1% from the first quarter of 2016. Net income of $28.3 million was up 8.4% over the year.

Same-store sales were down 0.2% due to decreased customer traffic, reported by the approximately 3,000 Ace retailers who share daily retail sales data.

John Venhuizen, president and CEO of Ace, acknowledged the somewhat lackluster sales performance.

“I’m delighted to report an 8.4% increase in net income, a double digit jump in accrued patronage dividends for our owners and surpassing a global store count of 5,000 stores in the quarter," said Venhuizen. “While revenue improved, our increase fell short of our expectations. And despite the obvious temptation, I’ll resist pinning the blame on the less than favorable weather.”

Retail revenues from Ace Retail Holdings were $52.0 million in the first quarter of 2017, however, up 2.8% from the first quarter of 2016 thanks to the addition of new retail stores. However, same-store sales decreased 3.0%.

The co-op also added 16 new domestic stores and cancelled 21 for a net decrease of 5 stores during the quarter — a total domestic store count of 4,358. This was still up 56 stores from the first quarter of 2016.

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Walmart delivers in first quarter; online sales skyrocket

BY Marianne Wilson

Walmart showed its muscle in the first quarter, reporting a big jump in online sales, an increase in traffic at its U.S. stores, and earnings that beat the Street.

The chain’s U.S. same-store sales grew for the 11th consecutive quarter, rising 1.4% in the period ended April 30, just beating analysts’ estimates. Online sales surged 63%, compared to 29% growth in the last quarter. Total revenue increased 1.4%, to $117.54 billion, slightly short of the $117.74 billion forecast by analysts, mostly due to the impact of a stronger dollar overseas.

“The overall net revenue gain of 1.4% may not sound stellar, but for a company of the size of Walmart, this is a significant uplift in dollar terms,” commented Neil Saunders, managing director of GlobalData Retail. “At Walmart U.S., the 2.9% increase in net sales equates to an additional $2.1 billion taken over the first quarter — an impressive achievement given 2016 included an extra day of trading from the leap year. From an already high base, Walmart is now winning market share across many categories." (Click here to read more of his comments.)

The retailer reported earnings per share of $1 in quarter, exceeding average estimates of 96 cents. Consolidated net income fell to $3.04 billion from $3.08 billion due to an increase a higher tax rate.

“We delivered a solid first quarter and we're encouraged by the start to the year," stated Doug McMillon, CEO, Walmart. "We're moving faster to combine our digital and physical assets to make shopping simple and easy for customers. Our plan is gaining traction."

Walmart said it now expects to earn between $1 and $1.08 per share during its second quarter, excluding a net benefit from the sale of Suburbia, the chain’s apparel unit in Mexico. U.S. same-store sales are expected to rise between 1.5- and 2%.

Walmart has been investing heavily in its digital operations. Under the direction of digital chief Marc Lore, the discounter has been improving its own online experience and also acquiring specialty online retailers. It also has been lower shipping prices. Most recently, it launched a program that offers a discount to items that are ordered online but picked up in the store.

“Walmart's e-commerce business is in the ascendancy,” added Saunders. “Positive changes to free shipping requirements and the addition of millions of more products to the online store have both resulted in steady uplifts in customer numbers. We are particularly pleased that Walmart is using discounting to encourage online shoppers to use more economical store pickup rather than delivery. We see the effective use of its real estate assets as one of Walmart's major strengths over Amazon.”

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Teen retailer posts mixed Q1 results

BY Marianne Wilson

American Eagle Outfitters’ profit shrunk in the first quarter amid charges and discounting.

Net income totaled $25.2 million, or 14 cents per share, compared to $40.4 million, or 22 cents per share, in the year-ago period. The retailer reported charges of $5.4 million related to severance and related charges due to corporate restructuring and its previously announced initiative to explore the closure or conversion of company owned and operated stores in Hong Kong, China, and the United Kingdom to licensed partnerships. American Eagle’s adjusted EPS was $0.16, which narrowly missed estimates.

Total revenue in the quarter, ended April 29, edged up 2% to a better-than-expected $762 million. Same-store sales rose 2% amid strong demand for its Aerie brand.

"The first quarter results reflected mall traffic headwinds, especially early in the quarter, with improved trends over Easter and a strong digital business throughout,” said CEO Jay Schottenstein. “As we look ahead, we are taking the right steps to improve our results and adjust our business for today’s rapidly evolving retail environment. We are creating efficiencies across our organization, as we aim to continue capitalizing on the strength of our brands, product leadership and other competitive advantages. The six million shares repurchased this quarter reflects the company’s strong cash flow, healthy balance sheet and confidence in our brands and long-term strategic initiatives."

In fiscal 2017, American Eagle plans to open 35 American Eagle Outfitters and Aerie stores throughout the U.S., Canada and Mexico. It plans to close between 25 and 40 store locations.

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