Dell profit, sales jump in 1Q, topping forecasts Dell Inc. said Thursday that its profit and sales grew in its fiscal first quarter, beating Wall Street expectations and signaling that the computer maker's turnaround efforts may be paying off.
For the three months ended May 2, Round Rock, Texas-based Dell Inc. earned $784 million, or 38 cents per share, up from $756 million, or 34 cents per share, in the same period a year earlier.
Dell says its revenue jumped 9 percent to $16.08 billion from $14.72 billion.
On average, analysts surveyed by Thomson Financial expected a profit of 34 cents per share on sales of $15.68 billion.
The company said strong growth of commercial and consumer products and services and lower operating costs as a percentage of sales helped drive the results above the forecasts.
Dell shares rose 12 cents Thursday, closing at $21.81 before the quarterly results were released. In extended trading, the shares jumped $2.02, or 9.3 percent, to $23.83.
Dell is trying to cut costs by $3 billion while also chasing Hewlett-Packard Co. in worldwide shipments of personal computers, a category it once led.
Dell still leads HP in U.S. PC sales, according to technology research firms IDC and Gartner Inc., but that could make Dell more vulnerable to a slowdown in the U.S. economy.
Chief Financial Officer Donald J. Carty told reporters that U.S. businesses "are holding back from spending" on desktops but that sales of servers and data-storage equipment were holding up.
The company reported that worldwide notebook computer shipments rose 43 percent from a year ago. Carty attributed the increase to a continuing shift from sales of desktops to notebooks and Dell gaining a greater market share of notebook sales.
On the cost side, Carty said the company has cut 7,000 jobs from a year ago, including 3,700 during the past quarter, while adding about 2,700 employees through acquisitions.
Founder Michael Dell, who returned to the company as chief executive in 2007, said last month the company would go beyond its earlier goal of cutting more than 8,800 jobs. He pledged to slash costs by $3 billion over several years to boost profits.
Carty, who plans to step down next month, said the biggest challenges for the company now were continuing to control costs and, "We've got to continue to improve the product line."
John Enck, a technology analyst for Gartner, said the better-than-expected resulted indicated that Michael Dell's return refocused the company on controlling costs and repairing relations with business customers.
"The customer experience has been good this year," Enck said.
Dell became successful by selling machines directly to customers -- mostly businesses -- by phone or over the Internet. Its new strategy of selling through retailers as well is an uphill struggle, some analysts said.
Barry Jaruzelski, a partner at the consulting firm Booz & Company, said even as Dell expanded beyond PCs, its success was due to a sharp focus on adding foreign markets and products that were in the company's strengths, such as PC servers and printers.
"Now that so much of the market is consumers, they have been forced into places that traditionally they didn't want to go, which is retail," he said.
With retail sales, Jaruzelski said, Dell loses the direct contact that used to give the company immediate feedback on winning pricing and features and an edge over competitors. Now, he said, "They only know what the retailers will tell them, and they have higher overhead rates." http://www.businessweek.com/ap/financialnews/D90VI3VO9.htm
Costco (COST) beat fiscal third-quarter estimates by 2 cents a share Thursday.
The warehouse retailer posted net income of $295.1 million, or 67 cents a share, up from $224 million, or 49 cents a share, in the prior-year period (which included a $30.3 million after-tax charge).
The Issaquah, Wash., company generated net sales of $16.26 billion, up 13% from $14.34 billion a year ago.
Analysts were looking for earnings of 65 cents a share on $16.35 billion in revenue, according to the Thomson Reuters consensus estimate.
PHILADELPHIA -- Soaring commodity costs prompted H.J. Heinz Co. to raise prices on a host of consumer products, helping the foodmaker post a 7.2 percent increase in fourth-quarter earnings on Thursday. The company also boosted its dividend.
The Pittsburgh-based maker of Heinz ketchup, Weight Watchers products and Ore-Ida potatoes said commodity costs rose by 8 percent in the year and expects similar increases for the next two years - foreshadowing continued higher food prices for consumers.
During a meeting with analysts, Heinz executives said costs were being propelled upward by growing demand from an expanding middle-class in India and China plus higher fuel prices. Still, Heinz sees future growth coming from abroad, especially in emerging markets, in the near term.
The company unveiled a new two-year plan where the focus will be on health and wellness products, selling to emerging markets and scouring for ways to lower costs and improve efficiency. To this end, Heinz said it is exiting five to six plants over the next two years to save $400 million.
"It's clear more consumers are making conscious efforts to lead healthy lives," said William R. Johnson, chief executive officer. It affects all age groups, "from babies to boomers."
In the quarter, Heinz earned $194.1 million, or 61 cents per share, compared with $181 million, or 55 cents, a year earlier.
Sales rose by 11 percent to $2.69 billion, driven by strong sales in Heinz's top 15 brands. Prices rose 4.5 percent while sales volume went up by 1.2 percent.
Analysts polled by Thomson Financial, on average, forecast a profit of 61 cents per share on revenue of $2.67 billion.
Sales in Asia rose by 23 percent to $446.1 million in the quarter, while Europe - representing the largest chunk of sales for Heinz - went up 16 percent to $970.8 million. North American sales rose by 6 percent to $783 million, while sales for the rest of the world went up by 25 percent to $99.8 million. The only decline was in U.S. foodservice, down 2.2 percent to $388.6 million.
Heinz also boosted its dividend by 9.2 percent to 41.5 cents per quarter.
For fiscal 2008, earnings rose to $844.9 million, or $2.63 per share, from $785.8 million, or $2.36 per share, a year earlier. Annual sales rose by 12 percent to $10.1 billion from $9 billion in the previous year. Prices were up 3.3 percent while sales volume rose by 3.6 percent. A weak dollar also boosted results by 5.1 percent in foreign currency exchange.
The company introduced over 200 new products, many of which centered on health by offering lower salt, sugar and fat content.
Growth was strongest in Heinz brands, Weight Watchers products and sales in emerging markets. The company stepped up marketing by 15 percent and research and development by 17 percent.
Heinz expects earnings of between $2.83 and $2.91 in fiscal 2009. Analysts expect $2.88 per share.
For 2009 to 2010, the company sees organic sales growing by at least 6 percent, with earnings per share rising by 8 to 11 percent. Operating income is targeted to increase by 6 to 7 percent annually. Heinz plans to boost marketing by $60 million to $100 million over the two years and introduce more than 400 new products.
Health and wellness will be a major thrust for Heinz, which sees the category growing as much as two times faster than other packaged foods.
Yearly sales growth in emerging markets is expected to be particularly robust, in the high-teens.
UBS analyst David Palmer said he likes what he's heard so far about Heinz's strategic plan.
In particular, he pointed to Heinz's plan for "more aggressive growth, accelerating growth in emerging markets, improving productivity through leveraging scale and becoming more efficient, and making talent an advantage."
Sears Posts Unexpected Loss On Increased Discounts Sears Holdings Corp. posted an unexpected first- quarter loss as it increased discounts to clear merchandise in the face of increased competition and a softening economy.
For the quarter ended May 3, the Hoffmann Estates, Ill. parent of the Sears and Kmart chains posted a loss of $56 million, or 43 cents a share, from net income of $223 million, or $1.45, a share, a year earlier. Shares outstanding fell 14% to 131.7 million.
Revenue fell 5.8% to $11.07 billion from $11.75 billion.
Excluding gains from sales of assets, the company's loss would have been 53 cents a share.
Analysts, on average, estimated the company would have earned 21 cents a share, according to FactSet Research. Sales also fell short of analysts' estimates of $11.3 billion.
Sears (SHLD) has lost sales and traffic to rivals from Wal-Mart Stores Inc. to J.C. Penney Co. after Chairman Edward Lampert, whose ESL Investments have a majority stake in the company, skimped on store investments and cut other costs, analysts have said.
Sears also isn't immune to the declining housing and credit markets and higher gasoline and food costs that have hurt consumer spending and made shoppers more budget-conscious, they said.
Sears said it's controlling costs as it doesn't expect any significant near- term improvement in the overall retail environment and expects its sales and gross margin for the rest of the year to continue to be pressured. The company, however, said declining sales have "moderated somewhat" in the second quarter.
U.S. comparable-store sales fell 8.6%. U.S. same-store sales, which reflect results at stores open at least a year, fell by 9.8% at Sears and by 7.1% at Kmart. Demand weakened across most major categories, especially within the home appliance, lawn and garden and apparel areas, Sears said.
Lampert has said he's considering selling some of Sears' products, such as Kenmore appliances, to other stores in addition to selling them online or via catalogs to bolster sales. He's also defended the company's position for not investing more money in its stores, saying that until the company figures out a way to improve the productivity of investments, the company will seek to be " responsible with capital."
Its gross margin narrowed to 27.3% from 28.2%, the retailer reported.
Sears Holdings' share-buyback authorization totals $643 million, including a newly approved $500 million.
Earlier Thursday, Costco Wholesale Corp. (COST), the Issaquah, Wash., warehouse retailer, reported fiscal third-quarter net income rose a stronger- than-expected 32%.
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