Guess? Inc. (NYSE: GES) 3Q21

Commentary

Total revenues declined by 10% in constant currency versus a 41% decline in the prior quarter. The sequential improvement was led by its European wholesale business, which was up 39% in constant currency. The company’s Americas wholesale business was down 34%, while its licensing revenues declined by 12%.

The company’s store comps in the US and Canada were down 23% in constant currency, in line with the prior quarter, as momentum in the US was offset by softening in Canada due to traffic declines as a result of the pandemic. Europe and Asia both showed sequential improvement in store sales this quarter. On a constant-currency basis, store comps were down 18% in Europe and down 17% in Asia. The improvement in Asia was driven by strengthening in the Chinese and Korean markets.

Guess? Inc.’s e-commerce business in North America and Europe was up 19% versus a 9% increase in the prior quarter.

Management said that the company now has one global line of products across all categories—women's and men's apparel, athleisure, footwear, kids, jewelry and all accessories, including handbags—which will enable the company to represent the Guess? brand consistently across all markets and reduce product development costs throughout its supply chain.

Capitalizing on the casualization trend, the company now has a strong focus on athleisure, which accounted for 7% of adult apparel sales in the third quarter.

Management said that the company has reduced product density in stores to provide a more sophisticated presentation with an emphasis on products rather than price or discounts. In terms of holiday preparation, the company stated that it had a very good start in November and plans to extend the holiday selling season; Guess? Inc. is trying to be more aggressive with marketing and visuals.

Outlook

For the fourth quarter, the company expects revenues to be down in the low to mid-20s, impacted by lower customer traffic in stores due to the pandemic and temporary government-mandated store closures, especially in Europe and Canada, as well as some permanent store closures.

In its wholesale business in Europe, Guess? Inc. has made some product development changes. CEO Carlos Alberini said, “We’ve made the decision to cancel the development of the pre-Spring/Summer line to consolidate the development of spring/summer products into one main collection, versus two in the past. This change will result in a smaller percentage of shipments of that main collection occurring in the fourth quarter compared to last year, with the majority of shipments to be completed in [the first quarter] of next year.”

In the European market, the company plans to expand its omnichannel capabilities, such as “buy online, ship from store” and “buy in store, ship from warehouse.”

PVH Corp. (NYSE: PVH) 3Q21

Commentary

Total revenues declined by 18% versus a 33% decline in the prior quarter. By brand, Tommy Hilfiger’s sales declined by 12% versus a 28% decrease in the prior quarter; Calvin Klein’s sales declined by 18% versus a 32% fall in the prior quarter; and Heritage Brands’ sales declined by 36% versus a 51% decline in the prior quarter.

By region, sales in North America declined by 38% and sales in Europe fell 4%. PVH Corp. is seeing strong performance in Asia, particularly in China, where sales were up 6% in the third quarter. Both Tommy Hilfiger and Calvin Klein brands delivered positive sales growth in the China market.

Total digital sales grew 36%, including 70% growth via the company’s owned sites. The company is seeing strong new-user growth in its digital business, particularly with younger consumers, as it expanded its casual assortments and offered digital innovations such as livestreaming. Management said that improved in-stock levels and the enhancement of its owned sites, including ship-from-store and additional payment options, will continue to attract and convert younger consumers.

Management said that the Calvin Klein brand continues to register strong global brand awareness, with increasing consumer consideration to purchase across all regions. The company’s Calvin Klein underwear collaboration with Kith, featuring Gigi Hadid, sold out 75% of the collection in just four days, highlighting incredible results with younger consumers both in terms of sales and engagement.

Outlook

The company expects its fourth-quarter revenues to decline by approximately 20%, impacted by lower customer traffic in stores owing to the pandemic.

In the fourth quarter, management said that it is pleased with the company’s Singles’ Day sales performance in China. Management further commented that PVH Corp. has performed better than expected over Black Friday week (including Cyber Monday) across all channels in North America and expects the current business trend to continue through the final holiday stretch.

Ulta Beauty (NasdaqGS: ULTA) 3Q20

Commentary

Total sales decreased by 7.8% versus a 26.3% decline in the prior quarter. Comparable sales decreased by 8.9% versus a 26.7% decline in the prior quarter. In the quarter, total transactions declined by 15.4% and the average ticket value increased by 7.6%.

By category, skin care delivered positive comps, driven by newer brands such as The Ordinary, TULA and Beekman 1802, as well as existing brands including CeraVe, First Aid Beauty and La Roche-Posay. Management said that increased interest in home skincare treatments as well as newness and innovation in face serums, body treatments and eye creams are driving strong category growth.

Fragrance and bath was the company’s strongest category this quarter, delivering double-digit comp growth, driven by newer brands, exclusiveness and new Ulta Beauty programs. Hair care and hairstyling tools posted positive comps, driven by ongoing DIY beauty and self-care trends. Makeup continued to see challenges, posting negative comps. However, some subcategories, such as eyebrows and eye lashes, continued to perform better.

Makeup accounted for 45% of total sales, down 600 basis points from last year; skin care, bath and fragrance collectively accounted for 26% of sales, up 500 basis points year over year; haircare products and styling tools accounted for 21% of sales, up 300 basis points; and the beauty services category accounted for 4% of sales, down 200 basis points.

Total digital sales grew 90%. During the quarter, Ulta Beauty opened a fast-fulfillment center in Jacksonville, expanded e-commerce operations in Chambersburg, Greenwood and Dallas distribution centers, and expanded its ship-from-store program to 105 stores.

Outlook

For the fourth quarter, the company expects its comps to be down 12–14%. Although Ulta Beauty saw encouraging sales results in November, the company is uncertain about the resurgence of the coronavirus and its effects, including lockdowns or restrictions, which may impact consumer demand through the rest of the quarter. This new comp guidance for the fourth quarter is slightly better than the company’s prior expectations of mid-teen comp declines.

In fiscal 2021, the company continues to expect to open about 30 new stores and execute five relocation projects. Currently, Ulta Beauty is suspending its plans to expand to Canada.

In fall 2021, the company plans to introduce Ulta Beauty at Target, a shop-in-shop experience online and in select Target locations. With 1,000 square feet of space, Ulta Beauty at Target will provide a curated assortment of established, emerging and prestige brands across multiple categories. Management said that the company aims to create an extension of its Ulta Beauty experience with Target team members.

Dollar General (NYSE: DG) 3Q20

Commentary

Total sales increased by 17.3% versus 24.4% growth in the prior quarter. Comp sales increased by 12.2% versus 18.8% growth in the prior quarter. Comps increased in each of the consumables, seasonal, home products and apparel categories, with the largest percentage increase in the home products category. Growth was driven by a substantial increase in average basket size, partially offset by a decline in customer traffic.

During the quarter, Dollar General opened its first two locations of a new store concept, Pop Shelf, and saw an encouraging initial result. The company also expanded DG Pickup, its BOPIS (buy online, pick up in store) service, to nearly 17,000 stores during the quarter, compared to 2,500 stores at the end of the second quarter.

The company is holding more inventory than normal this holiday season. CEO Todd J. Vasos said, “We really leaned in on inventory for Q4 around the holiday. We knew it was going to be a good holiday season for Dollar General. We went in, bought more inventory from the closeout market mainly, and we are in some of our best inventory positions in holiday that we've been in, in many years.”

Outlook

The company noted that since the end of the third quarter, it has continued to experience elevated demand, with comp sales increasing 14%, quarter to date.

For fiscal 2020, the company remains on track to open 1,000 new stores, remodel 1,670 stores and relocate 110 stores. In the first nine months of 2020, the company opened 780 new stores, remodeled 1,425 stores and relocated 76 stores.

For fiscal 2021, Dollar General plans to execute a total of 2,900 real estate projects, including 1,050 new stores, 1,750 remodels and 100 store relocations. Additionally, it plans to add fresh food produce in about 600 stores. The company also plans to add 30 new Pop Shelf locations by the end of 2021.

Five Below (NYSE: FIVE) 3Q20

Commentary

Total sales increased by 26.3% versus a 2.1% increase in the prior quarter. Comparable sales grew 12.8% versus a 12.2% decline in the prior quarter—the strongest third-quarter comps since 2010. Management said that consumer shopping patterns from the second quarter continued into the third quarter, with higher average tickets and lower transactions than last year.

The company noted that its home-related products, including new items such as shelving, novelty lighting and bow plants, witnessed the strongest consumer demand in the third quarter.

Management said that e-commerce sales were strong in the third quarter but still represent a low-single-digit share of total sales. The company is offering a same-day delivery service in about 300 stores, in partnership with Instacart, and is in the preliminary stages of its BOPIS initiative.

During the third quarter, the company opened 36 new stores across 20 states, bringing its year-to-date new store openings to 120 and its total store count to 1,018, growth of about 14% year over year.

Outlook

Management noted that Five Below is off to a strong start in the fourth quarter, including the Black Friday weekend, and has started increasing its store hours in order to help spread traffic.

The company plans to end fiscal 2020 with 1,020 stores, growth of 13% year over year. Five Below expects total capital expenditure of approximately $200 million in fiscal 2020, reflecting planned investments in the new Texas and West Coast distribution centers, new stores and remodels, and investments in systems and infrastructure.

Ollie’s Bargain Outlet (NYSE: OLLI) 3Q20

Commentary

Total sales increased by 26.7% versus 58.5% growth in the prior quarter. Comps increased by 15.3% versus 43.3% in the prior quarter. The company’s top-performing categories were housewares, bed and bath, health and beauty aids, flooring and food.

During the third quarter, the company opened 19 new stores, including one relocation, ending the quarter with 385 stores in 25 states, up 11.6% year over year.

The company reiterated its stance of e-commerce not being a priority as it is difficult to duplicate the “treasure hunt” experience online.

Outlook

Management noted that comps moderated in the latter part of the third quarter and continue to do so in the fourth quarter, with quarter-to-date comps up by low single digits.

In 2021, the company plans to open 50 stores, including up to four relocations.

Kroger (NYSE: KR) 3Q20

Commentary

Total sales, excluding fuel and dispositions, grew 11.3% versus 8.2% growth in the prior quarter. Comparable sales, excluding fuel, grew 10.9% versus 14.6% growth in the prior quarter. The trend of a higher average basket size coupled with lower transactions was prevalent in the third quarter as consumers continued to consolidate their shopping trips to stores. The company noted that its private-label brands grew 8.6% in the third quarter: Private Selection grew over 17% and Simple Truth grew nearly 15%.

Kroger’s digital sales soared 108% versus a 127% surge in the prior quarter. Management said that the company is on track to open the first two Ocado-powered distribution sites in early 2021.

Management said that the company is seeing limited signs of pantry loading. Nevertheless, it has secured an additional 5,000 truckloads of inventory and has increased distribution capacity reserves by 20% within its supply chain to get ahead and avoid potential supply disruptions.

Outlook

Kroger raised its full-year 2020 guidance: It expects comp growth of around 14% versus prior guidance of 13% growth, and adjusted EPS growth of 50–53% versus prior guidance of 45–50% growth. The company continues to see larger basket sizes and fewer visits, as well as growing demand for more premium products.

Management said that the company is on track to achieve the targeted $1 billion of savings in 2020 as part of its Restock Kroger initiative. For 2020, Kroger expects total capital expenditures of $2.8–3.2 billion.