Most of the enterprises in US have declared their third quarter result; and though hurricanes like Irma and Harvey had a negative impact on this quarter, yet results are quite positive and some of the companies have shown reasonably good sales, particularly in the home segment. Obviously, these companies are quite positive about the fourth quarter, as holiday selling season is one of the biggest revenue opportunity for retailers. Apparel Online picks up the top 6 US companies sourcing from India in the home segment to understand their business directions, but the task is more difficult than expected as industry views do not necessarily match with what the market performance suggests.
The biggest positive aspect to note is that top retailers/brands like Williams- Sonoma, Walmart, Target, The TJX companies have shown improvement in sales of home goods during the third quarter. Even Pier 1 Imports, a major home retailer which has still not announced its third quarter results, has indicated favourable movement. However, this does not mean that everything is fine with a strong home specialist like Bed Bath & Beyond, struggling with fall in sales.
Speciality stores register mixed results…
Williams-Sonoma Inc. (WSI), a specialty retailer of home products, saw Q3 net revenues grow by 4.3 per cent to US $ 1.299 billion versus US $ 1.245 billion in Q3 last year with comparable brand revenue growth of 3.3 per cent. Laura Alber, President and CEO said, “Our third quarter results demonstrate the effectiveness of our strategic priorities to deliver value, quality and excellent customer service. During the quarter, strong execution against our products and digital initiatives drove new customer acquisition and top-line expansion in a competitive and dynamic retail environment. Importantly, our demand during the quarter exceeded or was at least equal to net revenues across all of our brands – most notably in Pottery Barn and PBteen – which is a strong indication of the health of our business.”
Moving further, WSI will acquire Outward, a leading 3D imaging and augmented reality platform for the home furnishings and décor industry, for an all cash consideration of US $ 112 million. It will enable WSI to enhance and extend its high-touch customer service platform, and to develop technologies with Outward that will further transform the shopping experience for home furnishings.
Pier 1 Imports
Pier 1 Imports, second quarter highlights that net sales increased 0.4 per cent to US $ 407.6 million compared to US $ 405.8 million in the same period last year. The company’s comparable sales increased 1.8 per cent and e-commerce sales penetration reached 27 per cent. “We achieved solid top-line performance and year-over-year improvement in merchandise margin in a challenging retail environment. However, this level of performance does not reflect our expectations for the business. We believe there is far greater potential ahead to optimize the Pier 1 Imports brand and improve our long-term profitability,” said Alasdair James, President and CEO, indicating better performance in the next two quarters.
Bed Bath & Beyond Inc.
Bed Bath & Beyond Inc., a chain of more than 1,550 domestic merchandise retail stores in the US, Mexico, and Canada, in its second quarter, registered net sales of US $ 2.9 billion, a decrease of approximately 1.7 per cent from the prior year quarter. The company, undertaking a number of transformational initiatives to drive operational excellence, believes the initiatives will not only boost operational standards, but also the opportunities for added efficiencies. It should produce savings in excess of US $ 150 million over the next few years, a portion of which may be strategically reinvested toward future growth.
The White Company, British home goods and apparel company is expanding in US, and has opened its second store there. Having 46 stores in US and further expanding there, IKEA recently breaks ground at Virginia store which is scheduled to open in Spring 2019.
Having a total of 290 stores, Stein Mart reported a third quarter net loss of US $ 14.6 million, up from US $ 11 million in the same period in 2016.
Growth of home segment at department stores is encouraging…
Betting a private-label business, Target with 1,834 stores, reported a bigger-than-expected increase in quarterly same-store sales (comparable sales increase of 0.9 per cent) which is a positive sign specially for its US $ 7 billion turnaround plan. Its revenue was US $ 16.67 billion, versus an estimate of US $ 16.61 billion. Target Corporation is particularly enthusiastic about its new home goods partnership, co-designed with Chip and Joanna Gaines, Hearth & Hand with Magnolia, that features 300 products, most for under US $ 30, including tabletop, home décor etc. From the starting of this year, eight new exclusive brands have also been released, which cover home goods.
“We’re very pleased with the third quarter performance, including traffic and sales growth that demonstrate we’re building on the progress we saw in the first half of the year,” said Brian Cornell, Chairman and CEO of the company.
The TJX Companies
Net sales of The TJX Companies increased 6 per cent to US $ 8.8 billion over last year’s 7 per cent increase while its consolidated comparable store sales were flat compared to last year’s 5 per cent increase. For the first nine months of fiscal 2018, net sales was US $ 24.9 billion, a 5 per cent increase over last year’s 8 per cent increase. HomeGoods of TJ MAXX showed good growth as overall there was an increase of 14 per cent in its sale. Its comparable store sales was US $ 1078 million in FY 2017 while in FY 2018, it is US $ 1229 million. 44 stores of HomeGoods were also added in this quarter. It also started HomeSense in US by opening 3 stores in this quarter. Overall, the company added 139 stores in all of its divisions across the globe.
Ernie Herrman, CEO and President commented, “Our consolidated merchandise margin increased, which we believe speaks of the flexibility in our off-price business model. Overall, our organization has sharply executed our off-price fundamentals of opportunistic buying, lean inventory discipline, and being strategic and targeted in the flow of merchandise to our stores, which helped drive margins.”
For the third quarter, total company revenue for Walmart rose 4.2% to US $ 123.2 billion. The general merchandise segment overall posted a positive comp in the low single digits. Doug McMillon, President and CEO of the company shared that the results were especially strong in home, apart from few other categories.
I don’t see much impact of positive US market on Indian exporters as orders are not so encouraging and export figures are also not very inspiring. According to me, the home furnishing market is stagnant mostly due to operational problems within India, like decreased duty drawback, which has had a very strong impact. Ujwal Lahoti, Chairman, Textile Export Promotion Council, (Texprocil)
“Yes, definitely there is positivity and it has a positive impact on our business. After positive results, shares of Restoration Hardware (RH) soared more than 40 per cent. US market is reacting, people are buying and things will improve with time. Orders will flow after these reports. US market is very influenced by public perception and this should definitely help. Now we should start looking at business from quarter-to-quarter rather than year-to-year.” Sumeet Nath, Managing Partner, Raj Group, Panipat
“I don’t see any positive impact of market, even after such encouraging Q3 reports. Even the projected enthusiastic sentiments for Christmas season has not really been felt by the industry. We have noticed heavy downfall in order bookings and don’t have any positive feedback so far.” Madhu Sudhan V Kabadi, Director, Kabadi Shankarsa & Co., Bangalore
“Things have improved overall, especially compared to last few years. Though companies like Pier 1 Imports have reduced their order size due to their focus on online sales, still situation is good. Companies like Cost Plus World Market (Bed Bath & Beyond Inc) have also increased their overall orders by 7-8 per cent. We can, therefore, say that the purchasing power of US’s customers might be increasing.” Vicky Pandita, GM, Hansa Agencies, Delhi
“Results are quite positive and we are happy due to these results. US is a new market for us and in next two to three months, our first shipment will be delivered to the US. We are approaching top retailers of US and hope that the positive sentiments will support our move.” K. Muthukamatchi, Assistant Manager – Merchandising, Zen Linen International/Classic Linens International, Chennai