US retailers, including Walmart, will give a further reading of the state of US consumer confidence this week as they start the sector’s reporting of earnings for the important holiday quarter.
Overall monthly sales have remained significantly below pre-crisis levels, but analysts on Wall Street are expecting the sector as a whole to benefit from holiday demand that was at the high end of most retailers’ expectations.
Profit margins are also expected to have benefited from broad cost reduction efforts introduced by many retailers last year, and from reduced clearance of unsold merchandise, as they entered the season with inventory levels that had been significantly reduced.
Other retailers reporting this week are Abercrombie & Fitch, the youth fashion retailer; Whole Foods Market, the natural and organic supermarket; Office Max, the office supplies retailer; and JC Penney, the department store operator.
The comparatively positive mood has been reinforced by positive early guidance from Ann Taylor, the women’s clothing retailer, which said its fourth-quarter earnings would be “substantially higher” than a year ago, on better-than-expected sales of about $470m and an improved gross margin, reflecting reduced price markdowns.
Macy’s, the department store, Gap, the clothing store and Kohl’s, the discount department store all raised earnings guidance earlier this month after announcing their January sales results.
Branded clothing companies including Polo Ralph Lauren and VF Corp, which operate their own stores as well as supplying department stores and other retailers, have also been reporting comparatively robust results, again reflecting tightly managed inventory and cost-cutting.
Polo Ralph Lauren as well as Estée Lauder have reported improved luxury and aspirational spending that is likely to boost performance at traditional department stores.
But most retailers are expected to maintain their conservative view of the year ahead, with the National Retail Federation predicting a sales rise for the industry of about 2.5 per cent.
Eric Wiseman, chief executive of VF, whose brands include Lee jeans and Nautica sportswear, said last week he expected retailers to continue to focus on managing existing inventory levels more efficiently, rather than restocking.
“Everybody is working on speed and being more responsive in our inventory management,” he said.
Michael Dart, a retail consultant at Kurt Salmon Associates, argues that the overall low growth prospect means retailers will now focus resources on initiatives to improve the top and bottom lines.
Source: Financial Times