Rapaport Magazine

Retail Bulletin

February Retail Sales Down

By Rapaport
RAPAPORT... Retailer results have already proven that the U.S. is suffering from consumer spending pull-backs, but the government has confirmed that retail sales contracted in February by 0.6 percent from January, a drop that did not take inflation into account. However, the figure represents a 2.6 percent rise compared to February 2007. The news sent Wall Street’s early trading reeling because analysts were expecting a small increase for the month. Consumer spending comprises nearly 70 percent of the nation’s economic activity.

Tiffany Sales Up 15 Percent
Tiffany & Co. reported that net sales increased 15 percent to $2.93 billion in the fiscal year ended January 31, 2008, and rose 10 percent in the fourth quarter to $1.05 billion. Net earnings for the year grew 20 percent to $303.7 million, or $2.20 per diluted share. However, net earnings in the fourth quarter declined 16 percent to $118.2 million. The company attributed this decline to several one-time costs against profits, including a $19.2 million charge related to the discontinuation of some watch models following Tiffany’s alliance with the Swatch Group. A $15.5 million charge resulted from lower-than-expected store performance by the IRIDESSE subsidiary, while a nearly $48 million pre-tax impairment charge reflected Tiffany & Co. loans to Tahera Diamond Corporation, which has sought court protection from its creditors.

Net sales in the United States grew 4 percent to $527.9 million based on higher spending per transaction, as well as an increased number of transactions for the year. Comparable store sales declined 1 percent. Sales at Tiffany’s New York flagship store rose 10 percent, benefiting from higher sales to foreign tourists, according to the firm. International retail sales grew 21 percent to $422.56 million in the fourth quarter, boosted by a 40 percent rise in the Asia-Pacific region, excluding Japan, and increased 29 percent in Europe. Tiffany remained confident that it would build on its strong annual results in 2008, particularly as it expands in international markets.

Zale Stock Repurchase Grows
The board of directors of Zale Corporation approved an increase of $100 million to the jewelery retailer’s stock repurchase program. Zale initially authorized a $200 million repurchase program in November 2007, reporting that it expects to retire approximately 11 million shares once that repurchase is complete. Approximately $60 million is now available under the previous authorization. The new authorization, granted in addition to the November allocation, is expected to be fulfilled through open market purchases.

Bulgari Profits Up
Rome-based luxury retailer Bulgari SpA reported a 12 percent increase in net profits to approximately $235.7 million (EUR 150.9 million) for 2007, boosted by strong sales growth and a successful hedge against exchange rates and precious metals volatility. Sales turnover increased 13.6 percent to $1.7 billion (EUR 1 billion), with jewelry showing the strongest growth of 20 percent to $719.3 million (EUR 459.9 million) for the year. Perfume sales rose 15.4 percent to $347 million (EUR 221.9 million), watches 8.2 percent to $460.9 million (EUR 294.8 million) and accessories 1.2 percent to $131.9 million (EUR 84.4 million), the company stated. Operating costs increased 9 percent to $836.9 million (EUR 534.6 million) and operating profits grew 4.7 percent to $257.5 (EUR 164.5 million).

Bulgari’s European revenues increased to $668.3 million (EUR 427.3 million), of which Italy comprised $221.3 million (EUR 141.4 million). Sales in the Americas grew 21 percent to $276 million (EUR 176.4 million) and 14.8 percent to $672 million (EUR 429.3 million) in Asia. Bulgari opened 17 new stores during 2007, bringing its total doors up to 245 at year’s end, 149 of which were directly owned stores. The Bulgari Group expects sales, operating profit and net profit to rise between 8 and 12 percent in 2008. All figures were given at comparable exchange rates, which do not take currency fluctuations into account.

Costco Says Jewelry Sales Down
Richard Galanti, chief financial officer (CFO) of Costco, stated that consumers notably pulled back spending on diamond jewelry and furniture during the company’s second quarter ended February 17, 2008. Sales of food, electronics and sporting goods rose. The warehouse retailer reported a 31 percent increase in profits to $328 million during the quarter, but the company took a $53 million charge one year ago, which boosted this quarter’s net income by $25 million. Sales grew 12 percent to $16.6 billion and same-store sales rose 7 percent. The company expects to open 16 to 18 new stores before August 31, 2008. Costco operates 534 stores worldwide, with 391 in the United States.

Saks Profits Rise
Saks Incorporated reported that net income rose 83 percent to $39.5 million in its fourth quarter ended February 2, 2008, boosted by higher sales and cost cutting. Revenues increased 4.7 percent to $999.7 million during the three months and comparable store sales grew 9 percent. Sales, general and administrative expenses were slashed 7 percent to $237 million. Stephen Sadove, Saks’ chairman and chief executive officer (CEO), stated that sales momentum slowed in the latter part of the quarter, with February same-store sales rising only 3.4 percent.

Full fiscal-year profits fell 11.6 percent to $47.5 million. The shortfall was mostly due to gains from discontinued operations and income earned the previous year. Sadove named jewelry as one of the better performing sales categories in 2007. The retailer’s direct business grew by approximately 40 percent for the fourth quarter and for the year. Saks forecasted that same-store sales would grow in the mid-single digits in 2008.

Movado Profits Up
Movado Group Inc.’s fiscal 2008 sales rose 5 percent to $559.6 million for the 12 months ended January 31, 2008. Profits rose 21 percent to $60.8 million, which included a $20.8 million net realized tax benefit related to the resolution of an IRS examination and the utilization of net operating loss carryforwards. Movado’s fourth quarter earnings reflected a 3 percent sales drop to $138.6 million. However, net income rose 35 percent to $19.6 million. The company announced the closing of 1,400 wholesale doors in the U.S. before January 2009. Movado also unveiled plans to introduce a new collection at BaselWorld.

ShopNBC Jewelry Sales Rise
ShopNBC reported that jewelry and watch category sales rose 34 percent for the fourth quarter ended February 2, 2008, albeit without citing figures. The sales growth was equal to the rate one year ago. The twenty-four-hour shopping network posted a net loss of $864,000 for the quarter, compared to a net income of $3.5 million in the previous year, while fourth-quarter revenues rose 1 percent to $218 million. For fiscal year 2007, sales rose 2 percent to $781.6 million, and the company reported profits of $22.2 million — up from a loss of $2.7 million in fiscal 2006. Jewelry sales for the fiscal year rose 38 percent, ShopNBC stated.

Retailers Slash 34,000 Jobs
Retailers cut 34,000 jobs, while construction, temporary staffing and hospitality all reported net job losses, according to figures released by the U.S. government. The U.S. posted a net loss of 63,000 jobs in February, the highest loss since March 2003. Excluding federal hiring during the month, the loss was 101,000, but the government also backed down from a January gain and reported a net loss of 22,000 jobs. However, the unemployment rate fell to 4.8 percent nationwide, as the government no longer counted a number of people in the labor force. In the past year, approximately 637,000 workers have only been able to reenter the workforce with part-time positions, according to Keith Hall, the Labor Department’s commissioner. Zale Corporation, Macy’s and JCPenney have all announced job cuts.

Article from the Rapaport Magazine - April 2008. To subscribe click here.

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