A number of key industry retailers have reported their latest Q4/Year-End results over the past few weeks, how do they compare?
Lowe’s Delivers Mixed Results, Warns of Weak Canadian Market
Lowe’s beat Wall Street earnings forecasts on Wednesday, but reported disappointing sales growth as it predicted more weakness in Canada following the closure of dozens of unprofitable stores.
Lowe’s Chief Executive Officer Marvin Ellison said restructuring efforts were paying off, with its U.S. business growing 5.8% in January.
Since taking over in July, Ellison has shuttered stores across North America to boost profits and hired thousands of software workers to improve online sales.
“Most of the intense work over the past six months to transform our company has been in preparation for an improved spring season and fiscal 2019,” Ellison said in a statement.
But a weak housing market in Canada, where Lowe’s runs some 300 stores following the closure of 31 largely unprofitable ones, remained a worry, the company said.
“We anticipate continued weakness in the Canadian housing market in the near-term,” Ellison said, while adding the company was confident of its long-term potential in the country. “U.S. macroeconomic fundamentals remain sound for 2019.” The company offered up a forecasted range for the year that was slightly better than expected.
Lowe’s reported a net loss of $824 million, or $1.03 per share, compared with a profit of $554 million a year earlier, or 67 cents a share. It recorded pre-tax charges of $1.6 billion: $952 million was tied to a goodwill impairment charge Lowe’s took for its business in Canada.
Excluding one-time items, Lowe’s earned 80 cents per share, 1 cent above Wall Street estimates.
Net sales overall rose about 1% to $15.65 billion from $15.49 billion a year ago. That was short of analysts’ expectations for $15.74 billion.
Lowe’s said sales at its stores open for at least 12 months climbed 1.7% during the quarter, missing expectations for growth of 2.1%. Same-store sales for its U.S. home improvement business were up 2.4%, Lowe’s said.
Lowe’s is calling for earnings per share of between $6 and $6.10 in fiscal 2019. Analysts had been expecting $6.04 per share. Lowe’s says it expects annual revenue to be up about 2%, and same-store sales to climb roughly 3% this year.
Now, with Ellison at the helm, Lowe’s has been overhauling its business in a bid to stay competitive with Home Depot. It’s ending its retail operations in Mexico and has been shutting stores in North America to focus on its most profitable locations. Last August, the company committed to exit its Orchard Supply Hardware operations.
“Regardless of what you think of the economic environment — the housing environment — we think Lowe’s has a lot of company-specific initiatives in place to drive profitability this year,” Telsey Advisory Group analyst Joseph Feldman said in a report by CNBC.
On Wednesday, Ellison said the company was already seeing strong results from some of its “early spring” categories. Earlier this year, the company said it planned to hire more than 65,000 people in 2019 — some permanently and others on a seasonal basis — to help it meet peak spring demand.
As of Tuesday’s market close, Lowe’s shares are up about 14% from a year ago, bringing the retailer’s market cap to roughly $84.3 billion.
Home Depot Earnings Results Miss Forecasts, Expect Slowing Sales in 2019
The Home Depot reported on Tuesday fourth-quarter earnings and sales that missed analysts’ expectations and offered a weaker-than-anticipated outlook for fiscal 2019.
With U.S. home sales and prices under pressure, fewer shoppers are heading out to buy materials for home projects and renovations. The company also said that it was unprepared for the “extent of unfavourable weather” nationwide during the quarter.
“Wet weather delays projects, and that is evidenced in our sales performance in the quarter,” CEO Craig Menear told analysts on the conference call.
Home Depot reported net income for the quarter ended Feb. 3 of $2.34 billion, or $2.09 per share, compared with $1.78 billion, or $1.52 a share, a year earlier. The latest results included a pretax impairment charge of roughly $247 million, or 16 cents per share, tied to Home Depot’s wholesale business, Interline Brands. Analysts were calling for earnings of $2.16 a share, according to a poll by Refinitiv.
Revenue for the quarter climbed nearly 11% from a year earlier, to $26.49 billion from $23.88 billion.
That also came in short of analysts expectations for $26.57 billion. Chief Financial Officer Carol Tome said that the weather-driven demand negatively impacted sales by 0.85%.
“We saw through the quarter warmer weather in the month of December,” said Brian Nagel, Oppenheimer senior equity research analyst. “For home improvement that’s a negative.”
Sales at stores open for at least 12 months were up 3.2%, missing expected growth of 4.5%.
Home Depot said customer transactions were up 7.7% during the quarter, while the average shopper’s ticket increased 2.5%, and sales per square foot were up 4.9%.
Home Depot also announced a dividend increase of 32%, to $1.36 a share, and a new $15 billion share repurchase program.
Looking to fiscal 2019, which includes 52 weeks compared with 53 in 2018, the company said it expects to earn $10.03 per share, 23 cents short of analysts’ forecasts, according to Refinitiv data. Home Depot is calling for same-store sales to be up 5% in fiscal 2019, with revenue climbing roughly 3.3%. In fiscal 2018, same-store sales climbed 5.2%, and revenue was up 7.2% to $108.2 billion. Earnings per diluted share were up 33.5% to $9.73 compared to $7.29 in fiscal 2017.
CEO Craig Menear said “the health of the economy and the consumer, as well as the momentum of our strategic investments” should help the retailer meet its new targets.
The company has been spending aggressively to bulk up its e-commerce business and narrow the delivery window, or time it takes to get shipments to customers’ homes. In July, Home Depot said it planned to spend $1.2 billion over the next five years on its supply chain.
A year ago, Home Depot benefited during the fourth quarter from selling more appliances. As Sears’ store base continues to shrink, and with J.C. Penney pulling out of the appliance category, Home Depot is expected to continue to take a larger share of that market. But that also means Home Depot faced a tough comparison this fourth quarter compared with 2017.
“Home Depot and Lowe’s face tough year-over-year comparisons in the fourth quarter that included hurricane-related sales and a strong year ago December that was negatively impacted by weather in 2018,” Wells Fargo analyst Zachary Fadem said in a note to clients ahead of Tuesday’s report.
“The housing market remains delicate,” he added.
For much of last year, confidence in the U.S. housing market soared, benefiting Home Depot and Lowe’s.
But with mortgage rates climbing, attitudes have since started to turn sour. This may lead to home prices rising at a slower rate and the market cooling down, which has sparked some fears for the sector.
As of Monday’s market close, Home Depot shares are up nearly 11% this year, bringing its market cap to roughly $214.6 billion.
Loblaw Profit Beats Expectations as More People Shop at its Food and Drug Stores
Loblaw Companies Limited reported a better-than-expected quarterly profit on Feb. 21, as more people shopped at the Canadian retailer’s food and drug stores.
In the face of stiff competition from Amazon, Loblaw has been expanding its home delivery services in Canada, through its partnership with San Francisco-based online grocery chain, Instacart.
Adjusted gross profit in the retail segment, the company’s biggest, rose 2.6% to $3.25 billion.
Excluding items, the company earned $1.07 per share, beating analysts’ average estimate of $1.04 per share, according to IBES data from Refinitiv.
Net profit available to shareholders rose to $221 million, or 59 cents per share, in the fourth quarter ended Dec.31, from $31 million, or 8 cents per share, a year earlier.
Revenue was $11,218 million, an increase of $226 million, or 2.1%, compared to the fourth quarter of 2017. Retail segment sales were $10,976 million, an increase of $181 million, or 1.7%, compared to the fourth quarter of 2017.
Food retail (Loblaw) same-store sales growth was 0.8%. Drug retail (Shoppers Drug Mart) same-store sales growth was 1.9%, with pharmacy same-store sales growth of 0.6% and front store same-store sales growth of 2.8%.
The company delivered essentially flat adjusted revenue and net earnings growth of 0.2% for the full-year with positive adjusted earnings per share growth of 5.0% driven by share buyback program. This included the disposition of the gas bar business, the impact of the CREIT acquisition and spin-out of Choice Properties in the fourth quarter.
Walmart Q4 Sales Crush Estimates, Boosted by E-commerce Growth
On Feb. 19, Walmart reported earnings and revenue for the holiday quarter that topped analysts’ expectations, as its e-commerce sales surged 43% thanks to more shoppers using its online grocery delivery service and spending more per trip.
CEO Doug McMillon said “a favourable economic environment” has been helping Walmart grow sales and take market share from rivals, including in food and toys. Walmart also benefited from food stamps being released early because of the partial government shutdown, giving sales a last-minute boost.
“To us, the consumer looks like they’re in pretty good shape,” CFO Brett Biggs said. “Gas prices are down.
… We’re always monitoring the consumer and are ready to act if things change, but we feel our guidance is good for the next year and our business model works well in most environments.”
The company said it’s maintaining its sales outlook for 2019, as it raised its annual dividend — payable to shareholders on April 1 — by 2% to $2.12 per share, up from $2.08 a share.
Walmart reported net income for the quarter ended Jan. 31 of $3.69 billion, or $1.27 per share, compared with $2.18 billion, or 73 cents a share, a year earlier. Excluding one-time items, Walmart earned $1.41 per share, 8 cents ahead of analysts’ expectations based on a survey by Refinitiv.
Revenue climbed nearly 2% to $138.79 billion from $136.27 billion a year ago. That came in ahead of expectations of $138.7 billion.
Sales at Walmart stores in the U.S. operating for at least 12 month were up 4.2%, topping expected growth of 3.2%. The company said traffic at stores was up just 0.9% during the quarter, compared with growth of 1.6% a year ago. The average shopper’s ticket, however, grew 3.3%. A year earlier, the average ticket was up just 1%.
Online sales were up 43% during the fourth quarter, matching growth during the previous quarter.
Walmart said that for the year, it achieved e-commerce sales growth of 40%, which it had been targeting.
Total revenue was $514.4 billion, an increase of $14.1 billion, or 2.8%. Excluding currency, total revenue was $515.1 billion, an increase of $14.8 billion, or 3.0%. U.S. same-store sales for the year increased 3.6%.
Net income for the year was down 32.4% to $6.67 billion from $9.862 billion, or $2.26 per share from $3.28.
The company has been investing heavily in adding more products — like celebrity-inspired apparel and high-end camping gear — to its website in order to achieve that target and compete with Amazon. It’s also been on a buying spree of online brands like Art.com and lingerie retailer Bare Necessities.
Walmart didn’t change its sales outlook for fiscal 2020 from last October. Net sales growth is predicted to be at least 3%, hurt by deconsolidation of Walmart’s Brazil operations and reduced tobacco sales at Sam’s Club. Walmart still expects net sales to climb about 5% internationally.
Walmart is still calling for U.S. same-store sales to rise 2.5 to 3% for the year. Fiscal 2020 operating income is expected to decline slightly.
The company is targeting e-commerce sales growth of 35% for fiscal 2020, which won’t be as robust as what it was able to achieve last year. Walmart said it will spend the most money on store remodeling, e-commerce initiatives and bulking up its supply chain in 2019.
“Our fulfillment shipping costs are improving as we continue to enhance our [online] assortment,” McMillon said on a call with analysts and investors. “Repeat visits should increase and contribute to improving profitability.”
As of Feb. 15’s market close, Walmart shares were up about 7% this year, bringing the retailer’s market cap to about $290.5 billion.
Canadian Tire Profit Dips on One-Time Charge, but Tops Expectations
On Feb. 14, Canadian Tire Corp. Ltd. reported a dip in its fourth-quarter profit compared with a year ago, as it took a one-time charge related to its financial services deal with Scotiabank.
The retailer says it earned a profit attributable to shareholders of $254.3 million or $3.99 per diluted share for the 13-week period ended Dec. 29, compared to a profit of $275.7 million or $4.10 per diluted share a year earlier.
Revenue totalled $4.13 billion, up 5.4% from $3.92 billion.
Canadian Tire says its normalized earnings for the quarter, which exclude the $50-million financial services charge, amounted to $4.78 per diluted share, up 16.6% from $4.10 per diluted share a year ago.
Analysts on average had expected a profit of $4.69 per share, according to Thomson Reuters Eikon.
Consolidated comparable sales were up 0.8% in the fourth quarter with Canadian Tire up 0.2%, SportChek up 2.5%, Mark’s up 1.8% and Financial Services GAAR growth up 11.6% in Q4.
Retail segment revenue increased $192.4 million, or 5.3%. Excluding Petroleum, retail segment revenue increased 6.4%.
Canadian Tire Retail saw retail sales increase 0.6%, SportChek 1.9% and Mark’s 1.8%. Helly Hansen revenue in the quarter was $165.9 million.
For fiscal 2018, consolidated retail sales increased $514.0 million, or 3.4%, over the prior year. Excluding petroleum, consolidated retail sales increased 2.2%. Consolidated revenue increased $782.0 million for the full year, or 5.9%, over the prior year. Excluding Petroleum, consolidated revenue increased 5.1%. Diluted EPS was $10.64, a decrease of $0.03 per share, or 0.3%, over the prior year. Normalized diluted EPS of $11.95 increased 12.0%. Financial Services GAAR growth up 10.7% for 2018.
For the retail segment, revenue increased $692.1 million, or 5.7%. Excluding Petroleum, retail segment revenue was up 4.8%. Canadian Tire Retail sales increased 2.4% and comparable sales increased 2.1%.
SportChek’s retail sales increased 1.1% and comparable sales increased 2.0%. Mark’s retail sales increased 3.0% and comparable sales were up 2.8%. Helly Hansen revenue for 2018 was $347.6 million.
The company also announced that Dean McCann, its chief financial officer, will retire at the end of the year.
Amazon Reports Strong Q4 Results but International Concerns Ahead
Shoppers made Amazon their go-to e-retailer for holiday shopping. The e-retailer reported fourth-quarter 2018 net sales of $72.38 billion, up 19.7% from $60.45 billion in Q4 2017, with North American sales, excluding Amazon Web Services (AWS), increasing by 18.3% to US$44.12 billion and international sales up by 15.5%.
Amazon’s net income rose 62.9% to US$3.03 billion, or US$6.04 per share, in the quarter ended Dec.31 from US$1.86 billion, or US$3.75 per share, a year earlier, which included a tax gain.
Revenue in its Amazon Web Services cloud business surged 45.3% to US$7.43 billion to beat estimate of US$7.26 billion.
Amazon’s online stores—product and digital sales—contributed $39.82 billion to Q4’s sales, up 12.5% from $35.38 billion in Q4 2017. Sales at physical stores—Whole Foods, Amazon Bookstores, Amazon Go, etc.—generated $4.40 billion, down 2.75% from $4.52 billion. Amazon Chief Financial Officer Brian Olsalvsky attributed to the decline to how Whole Foods was accounted for in Q4 2017. Olsalvsky said Q4 a year ago included 5 more days of Whole Foods revenue. He also noted that Whole Foods sales made online via Prime Now are accounted for in Amazon’s online sales, not store sales.
Third-party seller services (including marketplace commissions) added $13.38 billion in Q4, up 27.2% from $10.52 billion. Sellers on Amazon’s marketplace accounted for 52% of units sold during Q4, up one point from 51% a year earlier and from 49% in Q4 2016.
The Q4 results come in at the high end of Amazon’s expectations. In its Q3 2018 results, Amazon projected it would generate sales of between $66.5 billion and $72.5 billion during the fourth quarter.
However, looking ahead, the company faces new regulatory hurdles in India and a slowdown in e-commerce sales in Europe.
Amazon began removing a wide array of products from its India website late at the end of January to comply with the new foreign investment curbs that kick in on Feb.1 and disallow companies from selling products via vendors in which they have an equity interest.
The company forecast net sales of between US$56 billion and US$60 billion for the first quarter, missed the analyst average estimate of US$60.77 billion, according to IBES data from Refinitiv.
The better-than-expected fourth-quarter results, backed by strong holiday sales, comes as investors fret about decelerating growth following two straight quarters of disappointing revenue. Sales climbed 19.7% in the latest quarter, which was faster than the 18.8% expected, but still the slowest since the first quarter of 2015.
This was the first time Amazon provided a year-over-year number on Whole Foods, a slower growing business. That likely contributed to the pullback in North American expansion, with the growth rate dropping to 18% from 42% in the year-ago period. Revenue at whole Foods increased about 6 percent from a year earlier.
International sales growth also slowed to 15% compared to the previous year’s 29% growth rate. India has been a notable challenge for Amazon, and the company wasn’t able to provide much clarity about what to expect from here. Amazon has been on a hiring spree in India, but a new law will soon kick in that prevents foreign online retailers from selling products through affiliated companies.
“There is much uncertainty as to what the impact of the government rule change is going to have on the e-commerce sector there,” Olsavsky said on the call. “Our main issue and our main concern is trying to minimize the impact to our customers and sellers in India.”
Amazon finished the year with $232.9 billion in annual revenue, passing the $200 billion milestone for the first time.
CEO Jeff Bezos highlighted the success of the Alexa voice-assistant in the earnings release.
“Alexa was very busy during her holiday season,” Bezos said in a statement. “Echo Dot was the best-selling item across all products on Amazon globally, and customers purchased millions more devices from the Echo family compared to last year.”
At the end of January, Amazon stock is up 18% over the past year. Its market cap, more than $840 billion is the largest of any publicly traded company in the world.
For the full-year, 2018 was a busy, profitable year for Amazon.com Inc. E-retailing’s leader generated $141.92 billion in product sales in 2018, up 19.7% from $118.57 billion in 2017. Product sales in the fourth-quarter holiday period accounted for 31.5% of 2018 product sales, coming in at $44.70 billion, up 8.2% from Q4 2017. Product sales account for goods sold by Amazon and exclude revenue from service sales, such as Amazon’s computer power business (AWS) and commissions paid by Amazon marketplace sellers. The number of units of goods sold worldwide, by Amazon and by marketplace sellers, during the quarter increased 14%.
Amazon’s revenue across all business segments totalled $232.89 billion in 2018, up 30.9% from $177.87 billion in 2017. Amazon’s net income was $10.07 billion, up 232.3% from $3.03 billion in 2017, with Amazon deriving about half of its operating income from AWS and half from its North American segment. International operations continue to lose money.
Costco Wholesale Corporation Reports January Sales Results
On Feb. 06, Costco Wholesale Corporation reported net sales of $10.71 billion for the retail month of January, the four weeks ended February 3, 2019, an increase of 8.0% from $9.92 billion last year.
For the twenty-two weeks ended February 3, 2019, the company reported net sales of $63.70 billion, an increase of 9.3% from $58.30 billion during the similar period last year.
Costco noted that Lunar New Year/Chinese New Year will occur in February same as last year; however, 11 days earlier this year. The holiday shift favourably impacted January’s Other International sales by approximately 4.5% and Total Company sales approximately 0.5%. February sales will be adversely impacted accordingly.
Same-store sales were as follows:
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Same-store sales excluding the impacts from changes in gasoline prices, foreign exchange and a previously disclosed accounting change concerning revenue recognition (ASC 606) were as follows:
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