VOL. 123 | NO. 48 | Monday, March 10, 2008
Retailers Report Mixed Sales Results In Feb.
By ANNE D'INNOCENZIO | AP Business Writer
NEW YORK (AP) - The nation's retailers got a little reprieve in February, as consumers hesitantly returned to malls and stores after retrenching in recent months. Among the big winners were discounters like Wal-Mart Stores Inc., whose results beat expectations.
Nonetheless, as retailers reported mixed February sales results last week, it was clear that consumers struggling with high gas and food prices and a slumping housing market weren't splurging and are focused on necessities, such as groceries, and low prices. Among the weakest performers were apparel stores such as Gap Inc., Limited Brands Inc. and J.C. Penney Co.
"On the whole, it looks more positive than I would have expected," said Russell Jones, director of AlixPartners, a consulting company. "But people are definitely focusing on the core things they need to buy. You are really seeing a trading down."
The UBS-International Council of Shopping Centers preliminary sales tally of 39 retailers rose 1.9 percent in February, exceeding the estimated growth range of 0.5 percent to 1 percent. The results, while still sluggish, were much better than the previous month's 0.5 percent increase, which was the industry's weakest January performance in nearly four decades. The tally is based on same-store sales or sales at stores opened at least a year. The measure is considered a key barometer of a retailer's health.
Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass., reasoned that consumer spending levels were so low that there "may have been some pentup demand" last month. He said he believes the expectation of tax rebate refunds also could have helped shoppers get in the mood to spend.
Still, February - a month when stores start bringing in the bulk of spring receipts - is one of the least important periods in a retailer's sales calendar. Analysts are monitoring the critical March and April period, which is expected to be challenging.
An early Easter, which falls on March 23, historically doesn't help spark sales of warm weather clothes. More importantly, shoppers continue to be squeezed by higher gas and food costs and are struggling with a housing slump and credit crisis that show no signs of abating.
Meanwhile, the job market, which had helped boost spending in recent years, has shown signs of slowing. The Labor Department reported recently the number of people signing up for unemployment benefits fell sharply in recent weeks, but the news failed to change the overall picture of a weaker employment market.
New applications filed for unemployment insurance fell by a seasonally adjusted 24,000 to 351,000 for the week ending March 1. A year ago, new filings for unemployment benefits stood at 327,000.
Given this harsh economic environment, discounters like Wal-Mart have benefited from consumers turning to lower-price shopping options. The company, which has been focused on price-cutting, reported a 2.6 percent gain in same-store sales. Analysts surveyed by Thomson Financial expected a 1.1 percent gain.
The company said electronics, groceries and health items helped boost sales. It said apparel sales improved, though the home goods business remains weak.
Discount rival Target Corp. said same-store sales rose 0.5 percent, ahead of analyst expectations of a 0.2 percent decline. The strongest-selling merchandise included health care products, food and shoes, Target said. Home furnishings, men's apparel and accessories were weaker.
Wholesale operator Costco Warehouse Corp. reported on Wednesday a 6 percent increase in same-store sales.
But the apparel business remains sluggish as shoppers cut back on discretionary items in tough economic times. And when they do spend, they're buying clothing at low-price chains. Stores are hoping that brightly colored spring fashions will entice shoppers, but some analysts have their doubts.
"I think it is going to be a challenge, even for those that have great offerings," said Chris Donnelly, a partner in the retail practice at consulting group Accenture.
Among the bright spots were off-price retailer TJX Cos., which operates T.J. Maxx, Marshalls and HomeGoods. The chain reported a 3 percent increase in same-store sales, in line with the 3.2 percent Wall Street estimate.
But many department stores and mall-based apparel stores struggled. J.C. Penney Co. said same-store sales in its department store business fell 6.7 percent, missing the 2.2 percent estimate. Nordstrom Inc. posted a 5.8 percent decline in same-store sales, worse than the 3.5 percent analysts expected.
Limited Brands struggled with a 9 percent decline in same-store sales, though results exceeded the 11 percent forecast. AnnTaylor Stores Corp. reported a 1.7 percent decline in same-store sales, beating the 3.6 percent estimate. Gap's same-store sales fell 6 percent, worse than the 2.8 percent analysts expected.
Results at teen retailers generally were weak. Abercrombie & Fitch Co. had a 2 percent sales decline; analysts expected sales to be unchanged. Wet Seal posted an 8.2 percent decline, worse than the 2.2 percent projection.
But Pacific Sunwear of California Inc. reported a 6 percent increase in February. Analysts expected a 0.4 percent decline. Aeropostale Inc. posted a 7 percent same-store sales gain, better than the 4.6 percent estimate.
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