The retail fiscal first quarter of 2010 saw retailers gain considerable upside in the bottom line as more than a year of belt tightening, expense controls and inventory reductions helped push profits up three-fold versus the year-ago period. The bottom line strength was also supported by sales growth that accelerated versus a very difficult year-ago quarter. A shift in the Easter holiday had an impact on comps for many retailers on a month-to-month basis, but the impact was negligible for the Q1 year-over-year results since the shift occurred within the quarter.
Top-line results for the overall public company retail market tracked by Sports Executive Weekly grew 9.8%, with solid growth coming from all tracked channels, easily reversing a low-single digit decline in the prior-year period. Based on all public company retailers tracked by SEW, first quarter retail sales rose 6.7% for the first quarter. Excluding the 6.0% increase in revenues at retail giant Walmart, sales increased 7.5% for the period.
Sales for the Internet/Catalog channel led the revenue gainers for the first quarter, led by a 50% increase in sales at GSI Commerce, which provides e-commerce services for a number of sporting goods retailers, a number of sporting goods brands and the professional sports leagues. Specialty retail top-line results were up 9.4% for the quarter, while Sporting Goods retail was up 7.9% and Family Footwear grew 8.2% for the period.
Overall consolidated gross margins for retailers tracked by SEW were up 260 basis points for the quarter to an average of 38.0% of sales, with the biggest increase coming from Sport Chalet, the Family Footwear channel, Lululemon, Adidas Group retail and The Finish Line. Lululemon accounted for roughly 20 basis points of the overall GM improvement for the quarter and nearly 20% of the total GM improvement for the Specialty retailers. A 2.1% decrease in consolidated inventories at quarter-end also helped push margins higher for the period.
Overall consolidated profits were up 139% for the quarter and return on sales (ROS) increased 200 basis points to 3.6% of sales in Q1 from 1.6% of sales in the year-ago period.
Of the 25 retailers tracked in the chart on page 3 (Genesco is counted as one retailer while it reports three divisions), eight reported a loss for the quarter, versus nine that reported a loss in the year-ago period. Of the eight retailers reporting a loss in Q1, five had narrowed their losses by an average of more than 64% versus the prior-year period.
The consolidated Specialty retail business got a significant boost from Adidas Group Retail results (+15%, +7% comps) and Lululemon (+69.3%, +51% comps). Excluding the Adidas and Timberland owned-retail results, specialty revenues were up 6.9% for the quarter.
Lululemon accounted for 1,600 basis points of the revenue increase for the Specialty segment revenue increase for the quarter. In contrast to the prior-year quarter when seven of the Specialty retailers reported comp store sales declines, only three did so in the most recent retail fiscal quarter. Pacific Sunwear has been the biggest percentage drag on the comp store results, posting back-to-back first quarter comp sales decreases in the mid teens for the last two years.
Gross margins improved 250 basis points in the Specialty segment on a consolidated basis, again thanks to Lululemon (+1090 bps), The Finish Line (+380 bps) and Adidas Group Retail (+365 bps). Foot Locker, Inc. also got into the act with a 140 basis point gross margin improvement of its own.
A very aggressive 7.3% decrease in Specialty retail inventories at quarter-end had a noticeable impact on the gross margin improvement as retailers continued to clean up aged inventories and reduce their reliance on promotions. Foot Locker, Inc. (-20%) and the Finish Line (-18%) had the largest inventory decreases ate quarter-end.
Profits in the Specialty segment jumped more than 67% for the retail fiscal first quarter, thanks in large part to a big reversal of fortunes in the mall as Foot Locker, Inc., The Finish Line and Genesco Specialty Retail combined to more than double (+108%) for the quarter, and the obvious impact of the Lululemon business, which tripled revenues for the period. Pacific Sunwear was the biggest downer in the segment as net loss for the action sports teen retailer widened 255% for the fiscal first quarter.
The Sporting Goods retail segment posted a 10.0% increase in revenues for the retail fiscal first quarter on a consolidated basis, with everyone contributing gains. Cabela’s was the only retailer in the group posting a comp store sales decline for the quarter. Hibbett Sports outpaced the crowd, posting a 14.5% increase in comp store sales for the period.
Excluding the very sharp decrease in the fiscal Q4 loss at Sport Chalet, profits for the segment would have increased 281% for the quarter.
Consolidated gross margins improved nearly 260 basis points for the Sporting Goods retail segment in Q1, led by a 310 basis point improvement at Sport Chalet. Dick’s Sporting Goods, Forzani Group, Hibbett, and West Marine all posted triple-digit basis point gains in gross margin for the period, while Cabela’s was the only retailer in the segment that saw margins narrow for the quarter.
Inventories inched lower for the quarter on a consolidated basis, as increases at Big 5, Dick’s SG, Forzani and Sport Chalet nearly offset declines elsewhere, including a 22% decrease in inventories at Cabela’s at quarter-end.
The Sporting Goods retail segment saw profits surge for the fiscal first quarter on a consolidated basis as all retailers in the group either increased profits or narrowed losses considerably. Dick’s SG was the biggest gainer for the quarter as net income jumped 156%, due in part to year-ago merger expenses associated with the Chick’s Sporting Goods acquisition. Excluding those expenses, DKS net income would have been up 105% for the period.
The Family Footwear segment rode the trend in toning and performance running to an 8.2% increase in revenues in the retail fiscal first quarter on a consolidated basis, with double-digit comp store sales gains coming from DSW (+16%), Famous Footwear (+16%) and Shoe Carnival (+13%), offset by weak reported sales gains at the Payless and Stride Rite Retail units of Collective Brands.
DSW and Shoe Carnival, the only two retailers to report retailer-specific gross margins in the Family Footwear segment, posted very healthy margin increases, resulting in an average 495 basis point gross margin improvement for the period.
The Family Footwear segment saw profits double in the quarter on a consolidated basis, with only the Stride Rite Retail unit of Collective Brands posting a decline for the quarter. Famous Footwear led all gainers with an 840% increase in operating profits for the quarter.
>>> The bad news is the first quarter may be the last the market reports for awhile as second quarter sales results have been less than stellar two months into the period (see story page 4) and consumers once again appear to be pulling back on continued tough unemployment news and a softening economic picture in general…
>>> There is talk in the market that retailers are starting to pull back from fourth quarter orders even as back-to-school deliveries hit the loading docks
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JJB Sports Sees Hike in Sales…
JJB Sports Plc reported that its sales for the six weeks from May 24 to July 4 jumped 22.3% on a like-for-like basis. Gross margin on a like-for-like basis over the same period was up 54.5%, resulting in an overall like-for-like gross margin over the same period of 43.9%.
Cumulative like-for-like sales from Feb. 1 to July 4 are positive 12.1%, while cumulative gross margin for the same period is 43.8%, which is a 7.3 percentage point improvement on the comparative period last year and a 5.4 percentage point improvement since the end of the last financial year, the U.K. sporting goods chain said.
JJB said that since the interim management statement on May 27, sales have continued in line with expectations “notwithstanding England's premature exit from the World Cup.” JJB also revealed that sales at its newly-refitted store in Slough had increased by 9% above the company average.
JJB, which operates 249 JJB stores in the UK and Ireland, came close to filing for the U.K.'s version of bankruptcy last year but a successful bond offering in Q4 allowed the retailer to pay off its debts.