Furniture and Home Decor

The smaller chains, however–Bon-Ton, Broadway, Gottschalks, Jacobson’s, and Crowley, Milner–all recorded negative earnings, during what is usually one of the more profitable quarters for department stores. And Proffitt’s and Younkers’ profit margins declined to 1.8 percent, from significantly higher levels a year ago and well below this quarter’s department store sector composite of 3.4 percent. A warmer-than-usual autumn, which depressed seasonal apparel sales, was the main cause cited for the declines.

Weather was also a factor for Sears, in the only exception to the big-good/small-bad trend this quarter, in spite of the chain’s relatively good comp store sales performance. Sears’ earnings declined by $18 million in the third quarter compared to last year. Its profit margin of 2.5 percent fell below even its second quarter results.

Furniture and Home Decor

Retailers in the furniture and home decor sector generally had a good quarter. Bed Bath & Beyond turned in a strong summer (quarter ended Aug. 30, 1994), with sales and profits growing 41 percent and 39 percent respectively over last year. Its 7.8 percent profit margin was the highest of the 67 companies reported here.

Heilig-Meyers and Williams-Sonoma also recorded significant sales and profit increases. After mediocre profit performances over the last couple of years, Williams-Sonoma finally appears to be on track. Its stock now trades at over $30 per share (Nov. 29 close), a P/E ratio of 48, versus a 12-month low of $12.38.

The Bombay Co., on the other hand, has seen its fortunes dwindle. For much of the past year, the company has been the hottest in the sector, experiencing comp store sales increases in the double digits. But the company earned only $55,000 in the most recent quarter, or $2.2 million less than last year. Its shares, at $10.50, are now priced at one-third their 12-month high.

Discounters and Catalogers

The discount store industry looks healthy in aggregate, but Wal-Mart, who makes up 55 percent of the sector’s sales and 85 percent of its profits, was the ONLY decent money-maker among the 10 reporting companies. Ames, Caldor, Jamesway, Kmart, and Venture all had less income this quarter from last year. Without Wal-Mart, the sector increased sales by 8 percent, suffered an income decline of 25 percent, and eked out a 0.6 percent net profit margin.

The non-store retailing sector as a whole fared pretty well in the third quarter. Its large profit increase was mainly due to large increases in profits from Inmac, Micro Warehouse, Home Shopping Network and Spiegel. But the large consumer catalog companies Fingerhut, Hanover Direct and Lands’ End suffered major profit erosion in the last quarter. Rising paper costs and higher costs incurred from expanded prospecting for this holiday shopping season appear to be the main culprits.


Post Author: John Snow

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