Discounters' sales strong
Retailers post mixed Oct. sales; discount chains lead, dept. stores off.
NEW YORK (CNNmoney) - Consumers continued to shun department stores and specialty shops in favor of discount chains in October as the Sept. 11 terrorist attacks amplified a trend toward more practical spending, according to individual retailers' latest sales reports, released Thursday.|
Discount chains like Wal-Mart Stores Inc. and Target Corp., and warehouse clubs such as Costco and B.J.'s Wholesale Club, posted strong sales at stores open at least a year, a key gauge known as same-store sales. The results reflected consumers' buying of staples such as food, drugs, dog food and other every day items.
Traditional department stores such as Federated, owner of Macy's and Bloomingdale's, and Sears continued to struggle with sales as they lost traffic to the discounters and struggled to revamp their internal operations.
"People are being much more rational with their expenditures. That's why we're seeing these discount price retailers generating strong customer traffic and solid sales increases," Robertson Stephens retail analyst Bill Dreher said. "And we expect strong earnings increases from them."
Wal-Mart (WMT: up $0.68 to $54.50, Research, Estimates), the world's largest retailer, said sales at stores open at least a year jumped 6.7 percent during the four weeks ended Nov. 2. That's nearly double the 3.4 percent increase in same-store sales the Bentonville, Ark.-based retailer posted a year earlier.
And the company's wholesale operation, Sam's Club, posted an 8.3 percent same-store sales increase, making it the sales leader among similar-type stores for the month although it traditionally is the laggard. Dreher attributed the change to better management as well as to consumers shifting their buying habits.
Costco Wholesale Corp. (COST: up $1.29 to $42.66, Research, Estimates) posted a 6 percent increase in same-store sales compared with a year ago, helped in part by higher tobacco prices, the company said.
Meanwhile, B.J.'s Wholesale Club Inc. (BJ: down $3.45 to $49.14, Research, Estimates) reported a 1.9 percent same-store sales increase. The results were lower than expectations, but the company's strongest sales in October came from basic items such as food and dairy as well as health and beauty aids. However, the impact of those sales was offset by softness in books, apparel, sporting goods and winter merchandise, the company said.
Target Corp (TGT: up $0.24 to $34.35, Research, Estimates) ., another discount chain that has benefited from the consumer shift, posted a 2 percent same-store sales increase in October. Though its core Target stores logged strong sales, the company blamed below-plan sales on weak performances at its Marshall-Fields department stores.
Sears Roebuck & Co. (S: down $0.05 to $43.58, Research, Estimates), the nation's number-two retailer, reported same-store sales fell 4.4 percent, with total sales falling 3.4 percent to $2.15 billion from $2.2 billion a year earlier.†
Kmart Corp.(KM: down $0.14 to $6.61, Research, Estimates), the number-three U.S. retailer, said same-store sales fell 4.4 percent while total sales also declined to $2.4 billion from $2.5 billion.
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J.C. Penney Co. (JCP: down $0.10 to $23.35, Research, Estimates), the number-five retailer, said same-store sales at its department stores slipped 0.7 percent, although it said that it was pleased with that performance given the current sales environment. Same-store sales at its Eckerd drugstore chain rose 9.3 percent, driven by strength in prescriptions.
Total sales at Penney gained 0.9 percent, despite a 1.9 percent decline in overall department store sales.
Federated Department Stores Inc. (FD: down $0.67 to $33.75, Research, Estimates) said its same-store sales fell 8.7 percent. Total sales dipped to $1.06 billion from $1.15 billion, a loss of 8 percent.
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Economists are keeping a close eye on retailers' sales to see how consumer spending, which fuels two-thirds of the U.S. economy, is faring during a sharp slowdown in the wake of the Sept. 11 terror attacks.
Many economists expect a recession, commonly defined as two consecutive quarters of shrinking gross domestic product (GDP), to follow the attacks. Third-quarter GDP was negative, and fourth-quarter GDP is expected to be worse.
To keep consumers spending despite rising unemployment and continued uncertainty about the war on terrorism, the Federal Reserve has cut its target for short-term interest rates a record-tying 10 times this year.
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While department stores suffered, specialty retailers Gap Inc., The Limited Inc. (LTD: up $0.33 to $12.92, Research, Estimates) and AnnTaylor Stores Corp. (ANN: up $0.10 to $24.50, Research, Estimates) †reported even more-sizable declines last month.
Gap (GPS: down $0.21 to $13.62, Research, Estimates) said its same-store sales plunged 17 percent, while total sales fell to $1 billion from $1.1 billion. The company also warned its third-quarter losses, scheduled to be reported† Nov. 15, would expand to a range between 5 and 7 cents a share.
The Limited, whose chains include not only the clothing stores by that name but also Bath & Body Works, saw same-store sales drop 6 percent as overall sales fell 10 percent to $591.7 million.
Comparable sales at women's wear retailer AnnTaylor tumbled 11.8 percent while overall sales dipped 1.8 percent to $103.3 million.