Hechinger Co. reported a 69 percent jump in profits for the second quarter yesterday, while Giant Food Inc. posted a small increase in earnings and said profits as a percentage of sales are down.
The reports from two of the Washington's area's biggest retailers provided additional evidence that consumers are changing their buying habits in the face of a recession.
Last Friday, the area's two largest general merchandise chains reported profits were declining because consumer spending is slowing.
Earnings dropped from $2 million (84 cents a share) to $928,000 (38 cents) at Woodward & Lothrop and from $903,000 (19 cents) to $834,000 (18 cents) at Garfinckel, Brooks Brothers, Miller & Rhoades Inc. despite modest sales increases by both chains.
In contrast, Hechinger yesterday said its sales for the three months ended Aug. 4 increased 29 percent to $37.1 million from $28.8 million (40 cents a share) from $789,000 (24 cents).
"The company has done well in recessionary periods in the past," noted President John W. Hechinger and Chairman Richard England in their report to shareholders. "People tend to use their leisure time to fix up their homes in these periods, resulting in a favorable impact on sales."
For the first half of the year, Hechinger sales were up 33 percent -- from $52.7 million to $70.4 million -- and earnings increased to $2.2 million (65 cents) from $1.4 million (40 cents).
At Giant Food, earnings for the 12 weeks ended Aug. 11 were $3.5 million (70 cents a share), up from $3.3 million (67 cents).
Sales of the area's largest supermarket chain increased by 15.4 percent to $273 million from $237 million a year ago. Local food prices have increased about 11 percent in the past year, and Giant's 15 percent gain indicates the chain not only has kept up with inflation but also has increased its actual sales.
But Giant's profits didn't keep pace with the sales gain, and the company's profit margin decreased from 1.39 percent of sales to 1.29 percent for the quarter.
For the first 24 weeks of the year, however, Giant earnings were up 25 percent to $7.8 million ($1.57 from $6.2 million ($1.26), and profits climbed to 1.45 percent of sales from 1.32 percent. Sales for the half increased 14 percent to $542 million from $474 million.
Lately, however, Giant earnings have been held back because the company hasn't been able to pass on to consumers all increases in prices, apparently because shoppers are becoming unwilling to pay higher prices.