Discount stores stocks up slightly

Discount Store News, Oct 16, 1995 by Neil Nordby

NATIONWIDE DSN REPORT -- Despite disappointing August same store sales, discount store stocks climbed slightly in the third quarter of 1995. The poor sales performance was attributed to weak Back-to-School sales and warm weather, which discouraged the purchasing of cold-weather apparel.

Amid the anticipation for better same store sales in the fourth quarter, the DSN Stock Index climbed 84.05 points, or 3.97%, coming to rest at 2201.76. In the third quarter, despite the lackluster sales and earnings results, there were 48 advancing issues vs. only 38 declining ones, while two issues remained unchanged.

As for the Wall Street comparison, the Dow Jones posted a gain of 232.98 points, or 5.11%, to make its mark at 4789.08. Both the S&P 500 Index and the NYSE Composite made good impressions on investors as they climbed 7.55% and 7.34%, respectively.

Service Merchandise reported net income for the second quarter ended July 2 of $800,000, or $0.01 per share. This was compared to a net loss --prior to extraordinary items--of $1.3 million, or $0.01 per share, in the prior year. The improved profitability is related primarily to improved gross margins in hard goods and jewelry sales.

Gary Witkin, the new president and coo of Service Merchandise, is changing the company from a catalog showroom to a "traditional retail store." Last quarter, Service rallied 1.88 points, or 35.71%, en route to a close of $7.13. Venture Stores is transforming into a category-dominat home, family and leisure retailer from a regional general merchandise discount store (see story, page 1). Robert Wildrick, president and ceo, announced that he expects the repositioning strategy to begin having a positive impact on profitability by the first quarter of 1996. For the month of August, the company had a 13. 1% drop in same store sales. The third quarter of 1995 saw Venture Stores slide 4.13 points, or 41.77%, to close at $5.75.

Office Depot announced the completion of a public offering in August. The offering of 17,825,000 shares of common stock produced net proceeds of $122 million, which will be used for debt repayments and general corporate operations. The largest office products retailer in the world reported sales of $1.2 billion for the second quarter of 1995, an increase of 30% over the year-ago quarter.

Office Depot shares for the third quarter rose 11.38 points, or 60.67%, to $30.13, making the retailer the largest dollar gainer in the index.

Neil Nordby is president of Nordby International, the Boulder, Colo.-based stock market tracking service.