For beleaguered retailers hoping to rouse their firms out of a digital-induced coma, federal tax reform may be just what the doctor ordered.
According to the National Retail Federation, those in this industry — which typically enjoy very few deductions and credits compared with others — will likely be among the biggest winners as the corporate tax rate falls from 35 percent to 21 percent.
With the 2017 holiday season of November and December generally regarded as a win for many big names — Nordstrom, Macy’s and JCPenney are examples — the 2018 backdrop seems promising.
Here, four retailers address their new tax kickbacks.
On Jan. 4, Macy’s announced that its comparable sales during the all-important holiday period gained 1 percent, while it saw double-digit growth on its digital platforms, with apparel, shoes, dresses and coats among its top-performing categories. In conjunction with the announcement, Macy’s narrowed the range of its previously provided 2017 full-year sales guidance — and noted a 6-cent lift in its earnings per share stemming from the new tax law. Specifically, excluding the legislative change, Macy’s expects earnings results for the full year to be in the upper end of previously disclosed guidance, in the range of $3.53 to $3.63. Including the new law, Macy’s expects earnings per share in the range of $3.59 to $3.69.
Citing kickbacks from tax reform, Walmart on Jan. 11 announced its plans to increase the starting wage rate for all hourly associates in the U.S. to $11, expand maternity and parental leave benefits and provide a one-time cash bonus of up to $1,000 to certain associates. Still, it’s worth noting that later that same day, the company unveiled plans to shutter 63 Sam’s Club locations — a move that would lead to a large number of layoffs.
Nevertheless, president and CEO Doug McMillon said Walmart is “early in the process of assessing opportunities tax reform creates for us to invest in our customers and associates, and to further strengthen our business, all of which should benefit our shareholders.”
“However, some guiding themes are clear and consistent with how we’ve been investing — lower prices for customers, better wages and training for associates, and investments in the future of our company, including in technology,” he added. “Tax reform gives us the opportunity to be more competitive globally and to accelerate plans for the U.S.”
Adding its name to the list of retailers announcing a holiday sales boost, Target said on Jan. 9 that its comparable sales during the holiday season grew 3.4 percent, besting the expected range of 0 to 2 percent. Simultaneously the company said it would route additional cash it gained from the tax law to “long-standing capital deployment priorities, including capital investments, dividends and additional share repurchase.”
Kohl’s shares jumped on Jan. 9 after the Menomonee Falls, Wis.-based retailer said its total and comparable sales for November and December increased 6.9 percent year-over-year. Based on stronger-than-expected holiday sales as well as expectations for fiscal January, the company also significantly upped its full-year guidance.
While its forecast did not include the impact of the new tax legislation, Kohl’s said the reform will “have a positive impact on the company’s effective tax rate and generate a favorable non-cash tax benefit related to the remeasurement of deferred tax balances in 2017.”