4 Major Earnings Trends This Week, From Luxury’s Recovery to Ongoing Supply Chain Issues
This week, some of the shoe industry’s biggest players — from department store Nordstrom to athletic chain Dick’s Sporting Goods — reported profits and sales results for their most recent quarter.
The financial numbers were telling: Taken together, they revealed the trends that have recently been circulating in retail, as well as the impact of fiscal stimulus, the vaccine rollout and pent-up demand on their balance sheets.
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Here, FN rounds up four takeaways from the past earnings week.
Record quarterly performances
Companies that struggled to make gains amid the health crisis as well as those that rode the pandemic-induced active and outdoor waves delivered impressive quarterly results.
Designer Brands Inc., for instance, returned to profitability for the first time since the onset of the COVID-19 outbreak, posting better-than-expected income and revenues. In a statement, CEO Roger Rawlins explained that the company’s “success was driven by green shoots in areas of the business that had been previously affected by the pandemic; synergies from our vertical capabilities coming to life, which allowed us to capitalize on positive trends faster than ever before; and our assortment strategy focused on athleisure, kids and seasonal products.”
Separately, Dick’s Sporting Goods Inc., whose business appeared to be pandemic-proof thanks to robust omnichannel capabilities and a fortress balance sheet, reported a blowout first quarter with its highest-ever earnings as well as a 115% spike in its comps. “We are in a great lane right now, and 2021 will be our boldest and most transformational year in the company’s history,” executive chairman and chief merchandising officer Ed Stack said.
Consumers splurging once again
Favorable macroeconomic factors have contributed to a rebound in luxury sales, which suffered early on in the pandemic as shoppers hunkered down indoors, work-from-home culture took hold and spending shifted from discretionary goods to essentials.
However, as evidenced by Capri Holdings Ltd.’s financial report, the sector’s recovery is on the horizon. The Jimmy Choo, Michael Kors and Versace parent logged a solid earnings beat and offered a positive outlook for the fiscal year, even as a good chunk of its brick-and-mortar fleet remains shuttered. “Looking forward, we remain optimistic about the outlook for the fashion luxury industry and Capri Holdings,” added chairman and CEO John Idol.
Reiterated or flat outlooks
A couple of retailers saw their stocks drop following the release of financial reports that included either reinstated or flat outlooks for the upcoming quarter or full year.
In the case of Nordstrom Inc., shares fell in after-hours trading on Tuesday after it posted earnings that fell short of expectations as well as reiterated its guidance for the 2021 fiscal year. It predicted a gain of more than 25% in revenues, with its EBIT (or earnings before interest and taxes) margin projected to be roughly 3% of sales. Contrastingly, some of its department store rivals like Macy’s Inc. and Kohl’s Corp. recently raised their forecasts.
On the other hand, Caleres kicked off the year with a stronger-than-anticipated quarter. While CEO Diane Sullivan said the company was “increasingly optimistic” about its ability to return to 2019 earnings levels in the year’s second half, it projected sales for the second quarter to be between $625 million and $650 million — effectively flat to the first quarter. Its shares are down in after-hours trading.
Supply chain disruptions
A number of companies — including Burlington Stores Inc., Genesco Inc. and Hibbett Sports Inc. — lamented constraints in their supply chains, which have encountered disruptions stemming from ongoing congestion at the ports.
While Hibbett CEO Mike Longo remarked that the problem at the docks has limited its ability to build inventory during the first quarter, Burlington CEO Michael O’Sullivan suggested that expense headwinds are likely to weigh on the off-pricer’s operating margin “throughout the balance of the year.”
What’s more, for Genesco, CEO Mimi Vaughn told analysts during the company’s conference call that the situation has been “challenging” — but the “good news is things have been getting better.” She indicated that the retail group will be doing “a good amount of catching up” in the second quarter and expects to be “in good shape” by the end of the third quarter.
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