Top Retailers Report Strong Profit, but Walmart Shoppers Struggle
The holidays turned out to be a lot brighter at the high end, judging by the results of four major retailers who reported earnings on Tuesday.
Walmart, Macy’s, Home Depot and Saks Fifth Avenue all reported sales increases for their fourth quarters ending in January. But while Walmart had to lower prices so aggressively that it hurt its profit, retailers focusing on higher-income customers crowed about the solid prices those shoppers paid.
For consumers with higher incomes, “I think there’s generally more confidence today than there was at this time last year,” said Macy’s chairman and chief executive, Terry J. Lundgren. But, he added, where someone is “making decisions between filling up their gas tank or buying shoes or a handbag, that consumer certainly is more impacted.”
Walmart has been holding down prices to get customers to spend. “We’ve seen the unemployment numbers come down a little bit, and that’s really good, but that hasn’t stopped the paycheck cycle,” said Charles M. Holley Jr., Walmart’s chief financial officer, referring to customers spending paycheck-to-paycheck.
Price cuts meant Walmart’s fourth-quarter margin in the United States decreased by $100 million. For the company as a whole, fourth-quarter margin fell by 0.4 percentage points, to 24.3 percent of sales.
Saks Fifth Avenue, meanwhile, which said it was selling items like fine jewelry, fragrances and men’s accessories at a fast clip, had a “historically high gross margin rate performance,” said the chairman and chief executive, Stephen I. Sadove, in a statement. There was “reduced promotional activity” throughout the year as the company increased its full-price sales, and its margins for the year rose to 40.8 percent of sales, from 40.1 percent. For the quarter, margin fell 0.2 percentage point to 37.6 percent.
At Macy’s, a decline in margin was not because of lower prices throughout the store, but because of a free-shipping promotion and markdowns on cold-weather gear, said Mr. Lundgren in an interview. Holiday discounts “were about the same level as last year and they were all planned,” he said.
The average price paid for items at Macy’s and Bloomingdale’s rose 9 percent in the quarter, because of some inflation in commodity costs and better sales of expensive items like jewelry.
Mr. Lundgren added that the Bloomingdale’s business was particularly strong. “The Bloomingdale’s customer is categorized as that consumer who’s buying more luxury product, and that business was very good, and you’ve seen that from some of the other luxury retailers,” he said.
Macy’s gross margins declined by 0.3 percentage point for the quarter and for the year, but its margins, at 40.4 percent for the year and 41 percent for the quarter, were much higher than Walmart’s.