Overheard On Wall Street: Department-Store Mayhem, HBC & Ralph Lauren

Sluggish department-store earnings received much of Wall Street’s attention this week as weaker-than-expected earnings rolled in from Nordstrom Inc., Macy’s Inc. and Kohl’s Corp.

Today, J.C. Penney Co. Inc. further dampened investor sentiment when it posted a Q1 2016 sales decline after analysts had dubbed the firm a safer bet than many of its counterparts in the challenged retail space.

Canada-based Hudson’s Bay Co. — owner of department-store chains Lord & Taylor and Saks Fifth Avenue — also gave inquiring minds a preview of its upcoming Q1 release today.

Read on for the buzz.

Hudson’s Bay Co.

Today, HBC released preliminary Q1 earnings for the first quarter, which ended April 30. The company said its Q1 consolidated comparable sales increased of 4.4 percent but declined 1 percent on a constant-currency basis.

HBC CEO Jerry Storch pointed to the company’s digital strategy as a source of strength in an otherwise tough retail space. The firm said its total digital sales increased 7.4 percent on a constant-currency comparable basis in the quarter.

We are encouraged by the results of our digital businesses where sales growth remained strong,” Storch said in a release. “As we look to the back half of the year, we expect the execution of our all-channel strategy to drive comparable sales growth.”

Comparable sales at the Department Store Group advanced 2.3 percent while comps at HBC Off Price (Saks Off 5th and the newly acquired Gilt) slid 4.1 percent. Comparable sales at Saks Fifth Avenue comparable declined 5.7 percent and recently acquired HBC Europe (Galeria Kaufhof, Galeria Inno and Sportarena) saw a 0.7 percent gain in comps.

In a challenging retail market, HBC’s results reflect our diversification across both geography and retail concepts,” Storch said. “[The Department Store Group] had solid performance during the quarter led by the ongoing strength of Hudson’s Bay in Canada, while HBC Europe saw positive sales growth despite the recent geopolitical uncertainty.”

Storch added, “Consistent with other U.S. luxury retailers, Saks Fifth Avenue experienced continued headwinds.”

Cowen and Co. analyst Oliver Chen maintained an outperform rating on the company’s stock.

Ralph Lauren Corp.

Better-than-expected Q4 earnings from Ralph Lauren Corp. this week provided a much-needed escape for those digesting department-store reports. On Thursday, the New York-based brand said its reported net income was $41 million, or 49 cents per diluted share, while its adjusted net income was $74 million, or 88 cents per diluted share. It was a beat on market watchers’ estimates for diluted earnings per share of 83 cents.

Net revenues for the fourth quarter were flat with the prior year period on a constant-currency basis, and declined 1 percent on a reported basis, at $1.9 billion.

UBS Investment Bank analyst Michael Binetti and Citi Research analyst Kate McShane both reiterated buy ratings on Ralph Lauren’s stock, while Susquehanna Financial LLLP analyst Christopher Svezia maintained a positive rating.

Although Cowen and Co. analyst John Kernan gave the brand a “market perform” rating, the analyst cautioned that pressure among its U.S. wholesale partners keeps him on the sidelines overall.

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