Retailers' February sales sluggish

Retail sales disappoint

March 8, 2001: 12:26 p.m. ET

Stores note sluggish February despite report of higher credit purchases

NEW YORK (CNNfn) - Some of the nation's biggest retailers reported sluggish February sales Thursday, reflecting caution among consumers as the economy slowed further early in 2001.

Bentonville, Ark.-based Wal-Mart Stores Inc. (WMT: Research, Estimates) said sales at stores open at least a year, a closely watched figure known as same-store or comparable-store sales, rose 4.3 percent in February from a year earlier, a smaller increase than the 6.8 percent gain it posted last February. Total sales increased about 12 percent to $14.8 billion from $13.3 billion.

Federated Department Stores (FD: Research, Estimates), the Cincinnati-based owner of Macy's, Stern's and Bloomingdale's, reported a 1.6 percent decline in same-store sales. Total sales fell 5.1 percent to $1.1 billion from $1.2 billion a year earlier.

Sears (S: Research, Estimates), the nation's No. 3 retailer, saw February same-store sales decline 2 percent while Dillard's reported a 2 percent decrease. May Department Stores, owner of Lord & Taylor, posted a 1.1 percent decline.

Same-store sales at Kmart (KM: Research, Estimates), the No. 2 retailer, increased 3.3 percent in February. Kmart's numbers come in the midst of a major restructuring aimed at streamlining inventory.

And Kohl's (KSS: Research, Estimates) Corp. same-store sales increased 7.3 percent while total sales soared 28.4 percent from a year earlier. Wall Street likes the Menomonee Falls, Wis.-based chain, which has been giving department stores such as J.C. Penney stiff competition by maintaining sales without resorting to big discounts.

Gap Inc. (GPS: Research, Estimates), owner of the Gap, Old Navy and Banana Republic chains, said same-store sales declined 11 percent from a year earlier while total sales increased 8 percent to $729 million.

Specialty retailers also posted mixed sales results. Sharper Image (SHRP: Research, Estimates) said comparable-store sales decreased 2 percent, though total store sales increased 5 percent to $12.6 million from $12 million a year ago.

CEO Richard Thalheimer blamed tough comparisons to last year's 38 percent comparable-store sales increase and bad weather, which forced several key stores to close for a day or more.

The Talbots, Inc. (TLB: Research, Estimates) saw same-store sales grow 9.3 percent in February and total sales grow 14 percent to $92.1 million. Same-store sales have been cut in half from year-ago levels, yet the company said February was a transitional month and that the March/April period will show improvement as spring merchandise hits the shelves.

And Ann Taylor Stores Corp. (ANN: Research, Estimates) reported a 6.1 percent decline in same-store sales, but a 9.7 percent increase in total sales to $73.8 million.

The company blamed inventory pileups and product assortment problems that carried over from the second half of fiscal 2000 for the lower sales.

Retailers have had a tough go of it in recent quarters as consumers become more discriminating in when and how they spend their money. Most of the nation's biggest chains suffered through a weak holiday season in which sales were driven by deep discounts, which eroded margins and profits.

Yet recent economic data suggest consumers are stronger than many at first thought, and that consumer confidence could rebound nicely by the second half.

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Some analysts believe consumers still have money to spend and that they are willing to spend it, but because of the recent economic slowdown, high energy prices and almost daily news of layoffs they have become much more discriminating and choosy in how they spend their money. Many are looking for real bargains, cutting back on impulse purchases and buying only what they need, Kurt Barnard, president of Barnard's Retail Trend Report in Upper Montclair, N.J., said.

A piece of that positive data came Wednesday in the form of a Federal Reserve report on consumer credit that Americans charged up higher credit card bills in February, indicating that they are shopping more frequently than economists and analysts at first thought.

UBS Warburg analyst Aram Rubinson said new home sales were up 18 percent in February, much lower than the 30 percent gain reported in December, but still robust enough to suggest that consumers are concerned about the economy, but not spooked.

"We're in a much more favorable demographic in this slowdown. We now have 21 percent of the population in its peak earning and spending years as opposed to 15 percent the last time," Rubinson said. "It tells me that we have a more established, wealthier, happier, more complacent consumer than we had at the last downturn."

Rubinson expects consumer spending to strengthen in the coming warmer months as people finish paying off home heating bills and gasoline prices come down. Together, he estimates, energy and fuel prices took $55 billion out of consumers' pockets this winter.

Consumer spending is a key gauge, since it accounts for about two-thirds of the U.S. economy.

Separately, J.C. Penney (JCP: Research, Estimates) said Thursday it had agreed to sell its direct marketing services unit to Dutch insurer Aegon NV for $1.3 billion. The move is part of the troubled chain's turnaround plan under new CEO Alan Questrom.

Wal-Mart shares gained 96 cents to $51.66 in early Thursday trading. Federated's shares sank 71 cents to $48.55, and Sears slipped 22 cents to $40.54.

Kmart shares gained 16 cents to $9.66, Kohl's shares slipped 10 cents to $66.45, and Gap shares gained 39 cents to $26.54.

Sharper Image shares slipped 66 cents to $8.25 in Thursday trading. Talbot's shares fell 54 cents to $47.49, and Ann Taylor shares were up 63 cents to $26.88.