Retailers Report Sluggish Sales
Retailers Report Sluggish Sales
Sep. 05, 2002
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NEW YORK (AP) _ Back-to-school sales failed to give the nation's largest merchants a much-needed lift, as parents fretted about job security and stock market volatility.
The question looming over the industry now is whether consumers, who have helped buoy the economy by spending on homes and cars, will continue to penny pinch at the mall for the all-important holiday season.
As retailers reported August sales Thursday, it was evident that department stores and some mall-based apparel retailers were the hardest hit. But even Wal-Mart Stores Inc., Target Corp. and Kohl's Corp., which are considered largely recession proof, posted results below Wall Street expectations.
``Consumers are shopping only on need, and they are being rewarded by waiting,'' said Richard Jaffe, an analyst at UBS Warburg Securities. ``Economic uncertainties have caused people to think twice about spending.''
Jaffe added that cool weather earlier in August hurt apparel sales.
When they have opened their wallets, it has been to answer the lure of automakers' generous incentives.
``Consumers are still out there. They're buying cars, but they are staying clear away from department stores and general merchandise stores,'' said Michael P. Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd., noting a surge in spending on autos in August, fueled by a slew of no-interest financing and rebates.
The Bank of Tokyo-Mitsubishi Ltd.'s same-store sales survey of 76 chain stores was up 1.6 percent, in line with Niemira's reduced projections. Niemira had projected a 2.5 percent gain earlier last month. That compares with a 3.6 percent increase a year ago.
Same-store sales, considered the best indicator of a retailer's health, measure revenues at stores opened at least a year.
Department stores' same-store sales fell 4.8 percent in August, the worst monthly performance since the 6.8 percent decline recorded in September 2001, Niemira said.
The disappointing results came as the Labor Department issued two reports that underscored a sluggish economic climate. The government said productivity of U.S. companies increased at its slowest pace in a year during the second quarter as the nation's recovery stalled.
The Labor Department reported Thursday that productivity _ the amount of output per hour of work _ rose at an annual rate of 1.5 percent in the April-June quarter, according to revised figures.
While that was a better showing than the 1.1 percent rate estimated a month ago, it marked a slowdown from the brisk 8.6 percent growth rate posted in the first quarter.
In a second report, new claims for unemployment insurance declined last week by a seasonally adjusted 8,000 to 403,000 after rising for three weeks in a row, the department said. But even with the decline, claims were at a level suggesting that the labor market remains weak.
The glum news pulled down stocks. The Dow Jones industrial average closed down 141 points to 8,284, wiping out Wednesday's 117-point gain. The Nasdaq composite index sank 41 points, or 3.2 percent, to 1,251, its fifth loss in seven days.
Given the mixed economic outlook, industry observers offered divergent forecasts on consumer spending for the rest of the year.
``There is no reason that the consumer mindset will change. Holiday will keep pace with a mediocre performance,'' said Tad Shepperd, president of Chicago-based ShopperTrak RCT, which tracks sales of 15,000 individual stores. It registered a 2.4 percent sales gain in August, the worst performance since Sept. 2001.
Carl Steidtmann, chief economist at Deloitte Research, disagrees, predicting overall consumer spending will rise 6.5 percent in the second half, up from a 1.6 percent gain in the first half. That will be fueled in part by continued mortgage refinancing which will free dollars that consumers can spend in stores, he said.
Economic uncertainties continued to drive consumers to low-priced chains in August. Wal-Mart reported a solid same-stores increase of 3.8 percent. But the same-store sales figure was short of analysts' expectation of a 4.4 percent gain, according to Thomson First Call.
Wal-Mart blamed weak apparel sales, in part, to cool weather, but said in a recorded statement, ``The consumer continues to purchase on need.''
Target reported that same-store sales fell 0.1 percent; analysts had projected a 1.1 percent gain.
Kohl's Corp. posted a respectable 4 percent gain in same-store sales, but it was below the 6.1 percent gain that analysts expected.
Meanwhile, a string of department stores, including Federated Department Stores Inc.; May Department Stores Co.; Sears, Roebuck and Co.; and Saks Inc. all reported same-store sales declines.
May posted a 8.6 percent decrease in same-store sales, while Federated's same-store sales fell 5.8 percent. Saks had a 3.3 percent decline in same-store sales.
Sears, blaming weak sales in part to the disruption on the selling floors caused by overhauling departments, had a 11.1 percent decrease in same-store sales in its department store business.
J.C. Penney Co. Inc. bucked the trend in department stores. It posted same-store sales gains in its department store business of 2.9 percent, slightly better than Wall Street projections.
Still, there were some back-to-school success stories among chains that cater to young customers.
Gap Inc., benefiting from an improved assortment of merchandise, posted a 2 percent decline in same-store sales, a smaller drop than what analysts expected.