Charlotte, NC—Belk Inc. reported Monday that its first quarter fell 30% due to lower margins caused from increased promotions as well as expenses due to strategic investments.
For the quarter ended May 4, Belk posted net profit of $28.2 million compared to $40.3 million a year ago. The company said that the profits narrowed on costs such as the remodeling of 24 stores and its continued investments in e-commerce, which grew 67% during the quarter.
“While those investments will increase our expense in the short term, we expect them to generate strong future returns,” said Tim Belk, chief executive.
Net sales, however, were up, rising 5.1% to $956 million. Comparable store sales 5.2% making it the 13th consecutive quarter of increases for the department store retailer. Online sales positively affected comparable store sales by 1.6%.
Introduces Private Brand Line by Cynthia Rowley
Best performing merchandise categories included accessories, cosmetics, fine jewelry, men’s and kid. Besides MADE Cam Newton, a menswear line, the company introduced CYNTHIA, a line of apparel, handbags, jewelry, scarves, accessories and small leathergoods by Cynthia Rowley during the quarter.
Belk, which celebrates its 125th anniversary this year, completed shoe and jewelry expansion and remodeling projects in 24 stores across 11 Southern states during the quarter. Other store improvement projects planned for the current fiscal year include the opening of a new store in New Braunfels, Texas, the opening of new stores in Morganton and Salisbury, N.C., to replace existing stores, and the completion of eight store expansions, nine store remodels, and expansions and remodels of watches and sunglasses departments in 25 stores. In total, Belk plans to invest about $100 million into real estate projects this year.
“Our sales growth for the quarter remained strong as we continue to benefit from the investments we are making in the business,” said Belk. “The bottom line was impacted by lower margins resulting from increased promotions as well the expense associated with the investments. While those investments will increase our expense in the short term, we expect them to generate strong future returns.”
Belk also repurchased $102 million worth of shares at $50 a share—that’s about 25% higher than what the company paid in first quarter 2012 when it repurchased shares for $40.80. Belk’s stock is primarily held by Belk family members and employees, and doesn’t trade openly on any stock exchange.