Christopher and Banks misfires during summer
A “merchandising misstep” took its toll on Christopher & Banks in its second quarter as sales decreased more than expected.
The company posted a net loss of $710,000 in the quarter, compared to earnings of $3.36 million in the year-ago period.
Sales totaled $94 million, down 12% from $106.6 million a year ago. The chain’s store portfolio was about 5% smaller than it was a year ago due to the company’s ongoing makeover project, which has resulted in some closings, and consolidations of its main store with its misses and petite-size outlets.
Same-store sales fell 12.4% in the quarter.
In the wake of the disappointing results, Christopher & Banks said it would slow its store conversion program and focus on maximizing the performance of its existing stores.
During 2015, to retailer expects to open nine new MPW stores and 33 outlet stores and to end the year with approximately 525 stores, of which 320 are MPWs, as compared to 518 stores at the end of fiscal 2014.
“Our disappointing second quarter performance reflects a combination of both macro headwinds, as well as company-specific factors that impacted our business, particularly in late June and in the month of July,” said CEO LuAnn Via. “While we have taken immediate action in a number of areas to address certain merchandising missteps and have seen trends in the business improve somewhat since July, much of the benefit from these initiatives is expected to drive improved sales for holiday 2015 and spring 2016.”
Kroger’s winning ways continue in Q2
Cincinnati — For almost 12 years, Kroger has reported same-store sales growth every quarter. And they did it again Friday.
The supermarket giant reported net earnings of $433 million, or $0.44 per diluted share, and identical supermarket sales growth, without fuel, of 5.3% in the second quarter of fiscal 2015.
“We are pleased with our second quarter performance. Our core food business continued its strong performance and we benefitted from fuel margins that expanded throughout the quarter,” said Kroger chairman and CEO Rodney McMullen.
The chief noted that that the company is working toward achieving its 48th consecutive quarter of positive identical supermarket sales growth, excluding fuel, three months from now.
“We are investing to grow our business for the future while delivering on our promises today,” McMullen said. “For example, our stores are hiring to fill 20,000 new, permanent jobs and we are expanding our digital and ecommerce offerings. Our confidence in Kroger has never been stronger.”
As a result of lower retail fuel prices, Kroger total sales increased 0.9% to $25.5 billion in the second quarter compared to $25.3 billion for the same period last year. Total sales, excluding fuel, increased 5.7% in the second quarter over the same period last year, the company reported.
Based on its strong year-to-date results, Kroger raised its net earnings per diluted share guidance to a range of $1.92 to $1.98 for fiscal 2015. The previous guidance was $1.90 to $1.95 per diluted share. This range exceeds the company's long-term net earnings per diluted share growth rate guidance of 8% to 11%, plus a growing dividend.
Kroger raised its identical supermarket sales growth guidance, excluding fuel, to a range of 4% to 5% for fiscal 2015. The previous guidance was 3.5% to 4.5%.
After 20 years, Target ends ties with major apparel supplier
New York — As Target Corp. continues its transformation under CEO Brian Cornell, news came out that the retailer is not renewing its contract with licensed apparel company Cherokee.
Dependent on Target for 43% of its revenue, Cherokee Global Brand saw its market value obliterated after it disclosed Target would not renew the decades-old relationship.
Publicly held Cherokee, bills itself as a marketer and manager of a portfolio of fashion and lifestyle brands including Cherokee, Carole Little, Tony Hawk, Liz Lange, Everyday California and Sideout. It has license agreements with best-in-class retailers and manufacturers covering in more than 40 countries. In reality, however, the company’s business was far less diverse than implied by the boilerplate language the firm uses to describe itself.
In 2014, licensed revenues from the sale of the Cherokee brand at Target accounted for roughly 43% of the company’s total revenues. The reliance on Target was even more dramatic in 2013 and 2012 when the retailer accounted for 53% and 57% of Cherokee’s revenues, respectively.
In regulatory filings, Cherokee warned that replacing royalty payments from Target would be a significant challenge and termination of its agreement, set to expire Jan. 21, 2017, would have a material adverse effect on revenues and cash flow.
What exactly a “material adverse effect” looks like became apparent the morning of Sept. 11, after late the prior day company disclosed that Target had in fact terminated is agreement in conjunction with the release of weak second quarter results. Shares of the company tumbled and roughly 30% of its market capitalization vanished. The huge sell off should serve as a cautionary tale for any supplier reliant on a single retailer for a disproportionate amount of their revenue, especially one prone dramatic strategic changes that accompany a change in senior leadership like Target had last year when Brian Cornell was named chairman and CEO last year.
“Moving forward, Cherokee Global Brands is in a strong position to enter into new platform partnerships that will expand Cherokee's presence in the U.S.," said Henry Stupp, Cherokee’s CEO. "Large-scale retailers and wholesalers have frequently expressed interest in the Cherokee brand based on its multi-category relevance and high consumer awareness. In the end, though, consumers make brands successful, and we know that Cherokee has a unique connection with many millions of consumers in the U.S. and around the globe."
Despite some progress in reducing its reliance on Target the past three years, the diversification hasn’t happened fast enough. The company’s second quarter revenues fell 3% to $8.5 million and net income declined to $1.9 million, or 22 cents a share, compared to $2.3 million, 27 cents a share, the prior year.
"Cherokee Global Brands continues to focus on the development of our global brands, creating value for our licensing partners and generating strong financial returns for our shareholders," Stupp said.