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Retail Outlook Turns 'Soft' Amid Disappointing Earnings

Retail Outlook Turns 'Soft' Amid Disappointing Earnings
(Andrii Yalanskyi/Dreamstime)

Thursday, 06 June 2019 04:10 PM

The outlook for retailers is getting grimmer by the earnings report.

Three more consumer-facing chains pared back their full-year guidance on Thursday: Craft-store Michaels Cos., home decor seller At Home Group Inc. and Zales operator Signet Jewelers Ltd.

The retailers all sell very different products, from yarns and paints at Michaels to diamond engagement rings at Signet’s Kay and Jared jewelry chains. But they’re all feeling the pain of weakening same-store sales in the first quarter, echoing the disappointing results reported last week by their mall neighbors in the apparel sector.

“The industry is little bit softer and more promotional than we’ve ever seen,” At Home’s Chief Executive Officer Lewis Bird said on Thursday’s earnings call. Signet’s CEO Gina Drosos called it a “very competitive U.S. retail landscape with soft traffic trends.”

Shares of the companies all fell. At Home tumbled as much as 46%, the biggest drop on record, while Michaels fell as much as 16% to a nearly five year low. Signet slipped as much as 5.7%.

The results underscore an emerging trend for consumer companies: The year is shaping up to be a challenging one, despite an unemployment rate that’s hovered near record lows and high consumer confidence. A number of pitfalls are emerging, from U.S. tariffs on Chinese imports to unpredictable weather, as well as shoppers’ ongoing migration online.

Plano, Texas-based At Home, which sells furniture and housewares without an online shop, cut its adjusted earnings forecast to between 67 and 74 cents a share, well below the $1.02 to $1.08 it expected a quarter ago. Bird said the Trump administration’s tariffs on Chinese goods will hit margins this year, but that it’s working hard not to raise prices. Since the company’s model is having the lowest prices, that means “we’ll have to get pinched on the margins,” he said.

Michaels also cuts its forecast, trimming its adjusted operating income outlook to $625 million to $650 million from $640 million to $665 million previously. The cut reflects the higher tariff rate, it said. It also said its adjusted earnings per share would be between $2.29 and $2.41 this year, down from a $2.34 to $2.46 range earlier.

At Signet, same-store sales this year will drop between 1.5% and 2.5%, marking a narrower range than the 2.50% to 0% decline it had been predicting.

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The outlook for retailers is getting grimmer by the earnings report.
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Thursday, 06 June 2019 04:10 PM
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