Retailers Send Mixed Messages on the Sector's Health

By Suzanne Kapner Features Dow Jones Newswires

Retailers navigating a rocky landscape didn't see a lot of clarity Tuesday as Dick's Sporting Goods Inc. and Coach Inc. reported weak results while TJX Cos, and Home Depot Inc. posted strong quarterly sales.

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Dick's shares plunged 17% to $28.96 in morning trading, while Coach fell 13% to $41.57. TJX inched up 1.7%, while Home Depot was down 3.5%

Consumer spending has been strong, though more of the spending is shifting to online purchases. Sales at retailers and restaurants jumped 0.6% in July from a month earlier, the biggest increase since December, the Commerce Department said Tuesday.

Dick's posted a 0.1% uptick in sales at stores open at least a year, less than the 2% to 3% increase the company had expected, and it lowered its earnings forecast for the year.

In a call with analysts, Dick's Chief Executive Edward Stack acknowledged the challenging retail environment, calling it "highly competitive and dynamic" but said the company would benefit from industry consolidation as competitors falter.

Although consumers are showing signs of life, they are choosy about where they spend. Coach's total sales fell 1.8% to $1.13 billion, short of Wall Street's expectations, though the company's latest quarter was a week shorter than the year-earlier one. Sales excluding recently opened or closed stores for the Coach brand rose 4% in North America.

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Meanwhile, at TJX, the parent of the T.J. Maxx, Marshalls and HomeGoods off-price chains, said total sales increased 6% to $8.36 billion in the latest quarter. Sales excluding newly opened or closed locations rose 3%, extending a string of gains.

Shoppers continue to snap up bargains at TJX, which has become one of the country's fastest-growing retailers by sticking with a playbook from a vanishing era. It relies heavily on the instincts of its merchandise buyers, many of whom have been with the company for decades. TJX stores rapidly turn over limited quantities of products that are all sold at bargain prices. The result is a rarity in retail -- a constanttreasure hunt.

TJX's net income fell to $553 million in the three months to July 29, from $562 million a year earlier. Income was dented by about 4 cents a share of foreign currency fluctuations and lower gross margins due to the company's inventory hedges.

Home Depot's total sales jumped 6.2% to $28.11 billion in its second quarter, while same-store sales rose 6.3%.

The company is continuing to benefit from the recovering housing market and cited sales growth among first-time home buyers. "We anticipated this happening with millennials coming into an age where they start to form families, children or pets or whatever their family unit might look like, they're moving into homes, which bodes very well for us," Chief Financial Officer Carol Tomé said during a call with analysts.

Write to Suzanne Kapner at Suzanne.Kapner@wsj.com

(END) Dow Jones Newswires

August 15, 2017 11:00 ET (15:00 GMT)