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Retailers’ results show sharp divide between losers, winners

NEW YORK (AP) — The divide between retail winners and losers is widening.

That became even more evident Wednesday with the latest batch of earnings reports: Big-box stores and off-price retailers have been responding faster to shoppers’ increasing shift online with expanded deliveries and better merchandise. But many mall-based clothing chains and department stores continue to suffer weak sales as they struggle to lure in shoppers.

“There is an increasing polarization in retail,” said Neil Saunders, managing director at GlobalData Retail. “It’s a vicious cycle, and it’s difficult to pull out of the tail spin.”

In fact, for the first two fiscal quarters of this year, earnings at off-mall retailers rose 3%, compared with a drop of 29% for mall-based retailers, according to Retail Metrics, a retail research firm, which analyzed results at 105 retailers.

On Wednesday, Target raised its annual earnings guidance after reporting strong sales and traffic. It was helped by its same-day delivery services, as well as a strong lineup of homegrown brands. Lowe’s, the nation’s second largest home improvement retailer behind Home Depot, blew past Wall Street’s second-quarter earnings expectations, buoyed by strong demand for spring goods and sales to contractors.

Both companies’ stocks soared.

Earlier this week, Home Depot handily beat second-quarter profit expectations, while Walmart raised its outlook for the year last week and off price chains like T.J. Maxx are also faring well, resonating with shoppers who love to treasure hunt.

But clothing chains and department stores haven’t differentiated their merchandise enough, and now discounters are further squeezing them by pushing into more affordable trendy fashions, retail industry analysts say.

Last week, Macy’s lowered its annual earnings guidance after its earnings suffered in the second quarter as it slashed prices on unsold merchandise. J.C. Penney’s is in worst shape. It posted another quarter of sales declines. Kohl’s shares, meanwhile, fell Tuesday after posting a sales decline though business improved later in the quarter.

Nordstrom is expected report declining second-quarter profits and sales late Wednesday.

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