Stocks opened higher Tuesday, but declined steadily during the session. The Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) closed just off their lows.
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Energy stocks gave up some of their recent gains, with the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEMKT: XOP) slipping 2.6%. Retail was also hit today; the SPDR S&P Retail ETF (NYSEMKT: XRT) lost 1.8%.
As for individual stocks, shares of Kohl's Corporation (NYSE: KSS) suffered a setback after the company beat earnings expectations but sowed some concern about sales in the second half, and The TJX Companies (NYSE: TJX) bucked the retail trend, rising after reporting a strong quarter.
Kohl's reports a solid quarter
Kohl's reported expectation-beating first-quarter results and raised full-year profit guidance, but shares slumped 7.4% on worries about sales in the second half of the year. Revenue increased 3.5% to $4.21 billion on the strength of a 3.6% gain in comparable-store sales. Earnings per share, adjusting for a loss on extinguishment of debt, rose 65% to $0.64. Analysts were expecting the company to earn $0.50 per share on $3.95 billion in sales.
The strong profit performance was due in part to improved inventory management, success of its initiative to reduce floor space in some stores, and strong sales of national brands, said Kohl's executives in the conference call. Gross margin exceeded company expectations by 50 basis points, leading to an outlook for an expansion in gross margin for the full year of between 15 and 20 basis points. EPS guidance for the year increased from $4.95-$5.45 to $5.05-$5.50.
The comparable-sales figure was boosted by a change in the retail calendar that moved the company's "Friends and Family" sale into the first quarter. Without that effect, comps would have been up only 0.4%. Kohl's said that Q2 will benefit from a shift of back-to-school sales into the quarter, but the effects of the calendar shifts will be reversed in Q3 and Q4. Guidance for full-year comps was maintained at 0%-2%.
The quarter was clearly a success, but the comments about the second half of the year erased a two-week run-up in the stock price in anticipation of the earnings report.
TJX rides sales growth to all-time high for shares
Discount retailer TJX Companies soundly beat expectations for its first-quarter results, and the stock set a new all-time high, closing up 3.3%. Sales increased 11.7% to $8.69 billion, compared with the analyst consensus of $8.47 billion. EPS increased 37.8% to $1.13, well above guidance of $1.00-$1.02 and Wall Street expectations of $1.02.
Comparable-store sales increased 3% due to strong traffic in the company's stores, where shoppers engage in a treasure hunt for bargains . The company added 71 stores in the quarter for a total of 4,141, and square footage increased 5% over the period last year. Looking forward, TJX increased the high end of its adjusted EPS guidance for the full year by $0.02.
"We believe that the consistency of our customer traffic increases demonstrates the strength and resiliency of our business and our ability to succeed through many types of economic and retail environments," said CEO Ernie Herrman in the press release. "Looking ahead, the second quarter is off to a strong start and we see plentiful opportunities to capitalize on the exciting fashions and brands available to us in the marketplace. We are convinced that we will continue to gain market share and grow successfully around the world."
TJX continues to deliver some of the most consistent performance in the retail industry, and its shareholders were rewarded for that today.
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