Learning from Retail Profit Growth

Kohl's, JC Penney, and Nordstrom all saw their first quarter profits jump, respectively 25, 13, and 19 percent. The first two attribute the jump to private label goods, while the last said that its customers seek designer goods.

But even the private label work is being designed by names - Vera Wang and Polo Ralph Lauren, for example. Maybe consumers are getting tired of paying for junk. That's not to say designer labels are necessarily better, but at least there is that buyer association. And it's the design name that seems to be important. Yet by doing more private label work in particular, the companies cut out layers of expense, which is why the profit jumps were so far ahead of revenue lift. Penney's revenue was up only 3 percent, while Kohl's was up 12.5 percent and Nordstrum's same store sales rose 9.5 percent. At the same time, Federated missed analyst expectations and there are warning sounds coming from Arkansas as Wal-Mart says it, too, could fall short of Wall Street targets. Clearly the two should be looking at what their competitors are doing right.