Lowe’s posts growth, but not enough for Wall Street
Mooresville, North Carolina-based Lowe’s reported modest second-quarter growth. It also had a message for RONA employees in Canada: welcome to the team.
The home improvement giant Wednesday morning reported sales increase 5.3% to $18.3 billion in the quarter. Net earnings increased 3.7%. Comparable store sales company-wide increased 2.0%, and 1.9% in the U.S.
But the company’s performance fell short of Wall Street expectations of about 4.1% comp-store sales growth. And the comp performance at Lowe’s slipped relative to retail rival Home Depot, which reported its sales performance Tuesday.
Lowe’s President and CEO Robert Niblick was bullish on the second half.
“We delivered solid results for the first half of the year, in line with our expectations," said Robert A. Niblock, Lowe's chairman, president and CEO. "We believe we are well positioned to capitalize on a favorable macroeconomic backdrop for home improvement in the second half of this year as we continue to execute on our strategic priorities to provide better omni-channel experiences, deepen our relationships with professional customers, and drive productivity and profitability.”
: $18.3 billion
: $17.3 billion
: positive 1.9%
: $1.167 billion
: $1.126 billion
One of the big stories playing out at Lowe’s this year is the acquisition of RONA Inc., the Canadian retailer and distributor, which was acquired officially May 20, 2016.
"We are also very pleased to welcome RONA's talented team into the Lowe's family,” Niblock said.
The acquisition led to a loss on a foreign currency hedge entered into in advance of the deal, the company said, decreasing pre-tax earnings for the second quarter by $84 million.
The acquisition also pushed up the company’s store tally significantly. It now has 2,108 home improvement and hardware stores in the U.S., Canada and Mexico. That’s up from 1,860 at the end of the first quarter. The company expects to increase its store count by 45 during the course of the year.
For the full year, Lowe’s expects comps to increase about 4%.
Fred’s names new executive VP, chief merchandising and marketing officer
Fred’s on Tuesday announced its new executive VP and chief merchandising and marketing officer, Mary Lou Gardner. Gardner will be replacing Bryan Pugh, who has resigned from the company, effective immediately.
“Mary Lou brings a wealth of leadership experience to the merchandising, marketing, pricing and planning area,” Fred’s CEO Jerry Shore said. “She joined Fred's at the beginning of 2016 as senior vice president/strategy/project management. In this short time span, she has become an instrumental part of the Fred's team.”
Before joining the Fred’s team, Gardner was with CVS Health, where she served in various roles, including divisional merchandising manager for beauty and personal care, senior director of inventory management, and senior director of merchandising for general merchandise and consumable, among several others. Before CVS, Gardner worked in various business roles, from sourcing to strategy and organizational development across such industries as health care, banking and higher education.
“She excels in the ability to lead and rally a team around a common purpose, which explains her many diverse roles at CVS, where she was called on several times to lead key strategic initiatives,” Fred’s president and COO Michael Bloom said. “We welcome her increasing contribution to our team’s efforts to build on our strategic investments in the future of Fred’s.”
Target Q2 earnings fall but top Street; plants red flag for full year
Target Corp. on Wednesday reported second quarter earnings that exceeded Wall Street expectations, but the discounter lowered its guidance for the full year amid declining sales and what it called a “difficult retail environment.”
Net income for the quarter was $680 million, or $1.16 cents per share, versus $753 million, or $1.18 per share in the year-ago quarter. Adjusted per-share earnings were $1.23, easily outdistancing analysts’ projections of $1.12.
Revenue fell 7.2% in the quarter to $16.17 billion, just short of estimates, from $17.43 billion in the year-ago period. The loss reflected a 1.1% decrease in same-store combined with the removal of pharmacy and clinic revenues from this year’s results. (In December 2015, Target completed the sale of its pharmacy business to CVS Health.) It was the chain’s first same-store sales decline in six quarters.
Same-store sales in Target’s key (“signature”) categories, which include baby, kids and wellness, outpaced total comparable sales by approximately 3%. Online sales increased 16%, compared to a 30% increase in the same period last year.
“While we recognize there are opportunities in the business, and are addressing the challenges we are facing in a difficult retail environment, we are pleased that our team delivered second quarter profitability above our expectations,” said Brian Cornell, chairman and CEO of Target. “Looking ahead, we remain focused on our enterprise priorities as we continue to see the benefits of investing in Signature Categories, store experience, new flex-format stores and digital capabilities. Although we are planning for a challenging environment in the back half of the year, we believe we have the right strategy to restore traffic and sales growth over time.”
Citing a challenging retail environment, Target said it was “prudent” to lower its expectations for comparable sales in the second half of the year. In both the third and fourth quarters of 2016, the retailer now expects same-store sales growth in the range of (2.0) percent to flat.
For the full year, The company now expects to earn $4.80 to $5.20 a share, compared with prior guidance of $5.20 to $5.40.