Earnings reports show retail is up… a little
Second quarter earnings reports in retail have been released and a slight upswing seems to be the trend. However, the difference between the top and bottom retailers is night and day. Companies like Amazon continue to dominate retail, crediting strong digital products, while JC Penney and Barnes and Noble are desperately in need of a turnaround.
Despite the positive upswing, not all analysts are optimistic. “It’s going to be a lot worse than people think,” said David Berman, founder of Durban Capital, in an August 12 interview with CNBC. “The consumer, as I see it, is actually not weak. I think the retailer is weak.” Berman is hinting at the evolution of retail into a multichannel realm. Retailers who have not adopted the latest practices of e-commerce and mobile retail are falling behind, and their earnings numbers show it. Successful retailers will be retailers who can integrate the online experience seamlessly into the in-store experience.
Comparing net sales growth of the second quarter from 2012 against the same time frame in 2013, the top five retailers in descending order are: Amazon with positive growth of 22 percent, Cabela’s growth of 20.7 percent, Urban Outfitters with 12 percent growth, Lowe’s with 10.3 percent, and O’Reilly Automotive with 10 percent growth. Amazon credits its growth to a strong lineup of digital products. “We're so grateful to our customers for their response to Kindle devices and our digital ecosystem. This past quarter, our top 10 selling items worldwide were all digital products – Kindles, Kindle Fire HDs, accessories and digital content,” said Jeff Bezos, founder and CEO of Amazon, in its second quarter earnings release. Honorable mentions in positive sales growth include Home Depot, Ross Stores, Dollar Tree, and The Gap.
Of course, there is the other side of the coin, the retailers who have not adopted the same practices as the retailers mentioned above. Seeing significant decreases in net sales in the second quarter of 2012 versus 2013, in order from greatest to least loss for the time frame, the bottom five retailers are: JC Penney with nearly a 12 percent loss in net sales, GameStop is down 10.7 percent, Barnes and Noble with an 8.5 percent loss, Bon-Ton stores dropped 6.3 percent, and Aeropostale fell 6 percent.
Recent times have been tough for JC Penney, but it thinks things improving. The first quarter of 2013 showed a more significant loss than the second, indicating perhaps a bandage has been put on its wound. CEO Mike Ullman thinks so. In JC Penney’s second quarter earnings statement, he said, “Since I returned to JC Penney four months ago, we have moved quickly to stabilize our business – both financially and operationally – and we have made meaningful progress in important areas of the business. There are no quick fixes to correct the errors of the past. That said, we have identified the challenges, put solid plans in place to address them, and have experienced and capable people in key roles to do so.”