News

High-end retailers doing better than big box stores

February 22, 2012

High-end retailers had more to celebrate this holiday season than their box box counterparts, judging by the results of four major retailers who reported earnings this week.

Although Walmart, Macy's, Home Depot and Saks Fifth Avenue all reported sales increases for their fourth quarters ending in January, Walmart was forced to lower prices so aggressively that profits were hurt. The higher-end stores kept their prices the same, and customers still paid, according to the New York Times.

For consumers with higher incomes, "I think there's generally more confidence today than there was at this time last year," Macy's chairman and chief executive Terry J. Lundgren said in the story. "Where someone is making decisions between filling up their gas tank or buying shoes or a handbag, that consumer certainly is more impacted."

Price cuts at Walmart led to the company's fourth-quarter margin in the U.S. decreasing by $100 million. For the company as a whole, fourth-quarter margin fell by 0.4 percentage points, to 24.3 percent of sales, according to the Times article.

On the other hand, Saks Fifth Avenue had a "historically high gross margin rate performance," chairman and chief executive Stephen I. Sadove said in a statement.

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.

Lundgren said 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."

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.

Home Depot reported that its same-store sales rose 5.7 percent for the fourth quarter. Its margins increased 0.29 percentage point from the same quarter a year ago, to 35 percent.

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