Walmart’s Q2 Results
By Stephen Springham, senior retail analyst Planet Retail
After the horror show of Q1, Walmart had so much to prove domestically in Q2. And it has again come up short. A U.S. comp store decline of 0.3% was below earlier management of a 0.2% decline, guidance that was endorsed as recently as the Annual Shareholder Meeting in June. This marks the second quarter that U.S. comps have been both in negative territory and below guidance. Those accusing Walmart of ‘crying wolf’ in its bullishness (ourselves included) may feel vindicated.
“Although ostensibly an improvement on Q1 (when U.S. comps were down 1.4%), Q2 was arguably a weaker performance. Although the U.S. consumer remains challenged, the factors that derailed performance so horribly in Q1 (delays in tax refunds, poor weather and lower inflation in food) have all receded and the operating backdrop in Q2 was far more benign. One telling factor is that the company seems to have woefully underestimated the effect of income tax increases that came into force at the end of 2012, and continue to weigh heavily on Walmart’s core customer demographic.
‘Headline’ growth of 2.9% (or +4.4% at constant currency rates) at the International division also paints a flattering picture of what lies beneath. The top-line growth figure masks a very mixed performance, but trading remains almost universally tough. Mexico, the U.K. and Canada have been previously highlighted as the three key drivers of international profitability, but all three markets are challenged. Trading has been soft in Mexico, the U.K. remains a mature and highly competitive environment, while the arrival of Target in Canada has intensified pressure on a business already struggling to achieve comp growth. There were some positives in Q2, e.g. continued comp growth in China on the back of a prudent location planning strategy. But by and large, the International division failed to provide much comfort.
Predictably, e-commerce was flagged as a bright spot, with year-on-year growth sustained at around the 30% mark. With a more coherent e-commerce strategy taking shape, investments in businesses such as Yihaodian in China are looking increasingly shrewd.
Q2 comp-store sales rise at Kohl’s, but miss Wall Street estimates
MENOMONEE FALLS, Wis. — Kohl’s continues to focus on funding its e-commerce growth following results for the second quarter ended August 3.
The company reported net sales of $4.29 billion, a 2% increase from $4.21 billion. Comparable-store sales increased 0.9% for the quarter, but according to a Reuters report, fell short of Wall Street estimates.Net income for the quarter was $231 million, a drop from $240 million for the prior-year quarter.
“We are pleased with our progress in the second quarter. Sales improved significantly over the first quarter and our gross margin improved over last year,” said Kevin Mansell, Kohl’s chairman, president and CEO. “Expenses were well-managed and we ended the quarter with inventory per store up mid-single digits while funding our e-commerce growth. I would like to thank each of our associates for their contribution to our results."
Kohl’s ended the quarter with 1,155 stores in 49 states, compared with 1,134 stores at the same time last year. The company opened nine new stores during the first quarter of 2013 and expects to open three new stores and remodel 30 stores in the fall.
Soros increases Penney stake; two other large investors shed holdings
New York — As turmoil continues to surround J.C. Penney, one investor is upping his support of the embattled retailer even as two other large investors leave. Regulatory filings on Wednesday revealed that billionaire investor George Soros has added two million shares to his current 19.98 million in Penney holdings.
The latest investment makes Soros Fund Management Penney’s second-largest investor, behind disgruntled hedge fund manager Bill Ackman.
Ackman, who earlier resigned from the retailer’s board after an unsuccessful rally to oust interim CEO Mike Ullman and speed up the search for a new CEO, owns 39 million shares through his Pershing Square Capital Management.
Other investors aren’t expressing the same Soros confidence.
Hotchkis & Wiley, with 10.1 million Penney shares at the end of the second quarter, and Tiger Global Management, with 5.3 million shares, have liquidated their positions. Glenview Capital reduced its holdings from 9.5 million to 8.4 million shares. And Fidelity Management & Research has reduced its position by half – to 4.6 million shares.