By Michael Johnston, founder of
In the latest sign that this recovery just might have some staying power, several major retailers reported strong earnings reports for the third quarter. But along with these pleasant surprises came warnings of tough times ahead, and forecasts for the upcoming holiday season remain murky. The companies that have reported earnings so far this week run the gamut from high-end stores to bargain-basement discounters.
High-end retailer Saks (SKS) posted a profit for the first time in six quarters by cutting expenses and avoiding the temptation to push promotions and clearance discounts amid falling sales. Instead, Saks has been working with suppliers to lower prices on designer goods, allowing the company's stores to sell more luxury brands starting at lower prices. "I think there have been some changes in the luxury consumer," Chief Executive Steve Sadove said on a call with analysts. "People are very much focused on value."
Meanwhile, Target (TGT) posted an 18% jump in third-quarter earnings on stronger gross margins. But the trendy discounter also warned that November sales have been soft and that expectations for the fourth quarter were low. CEO Greg Steinhafel was surprisingly blunt in his assessment of the importance of this year's Black Friday, saying that "the fourth quarter will be decided by the two days after Thanksgiving and the two days before Christmas."Elsewhere, The TJX Companies (TJX), which owns off-price retailers T.J. Maxx and Marshalls, reported a profit of $347.8 million for the quarter ended Oct. 31, a significant jump from $235.9 million in the same quarter last year.
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