Most retailers post weak sales in March
NEW YORK (AP) - April 10, 2008 As retailers reported sales results on Thursday, Wal-Mart Stores
Inc. and Costco Wholesale Corp. were among the few winners, as
shoppers stuck to basics. Wal-Mart raised its earnings outlook,
noting that better inventory control helped to limit markdowns on
merchandise. It also said that April sales should top prior
expectations.
But March proved to be bleak for most others, including J.C.
Penney Co., Gap Inc., and Limited Brands Inc. All of them reported
sharp drops in sales. Even high-end department stores like Saks
Inc., languished; Saks noted that jewelry and designer women's
apparel were among the weakest areas.
Merchants faced a slew of obstacles to improving sales: record
gas prices, rising food costs, a weaker job market, slumping home
prices and an early, frigid Easter. The weather may be warming now,
but the rest of those problems aren't likely to dissipate soon.
"Consumers are buying what they need," said Jennifer Black ,
president of Jennifer Black & Associates, an equity research
company in Lake Oswego, Ore. For everything else, shoppers are
being pickier and focusing on discounters, she said.
According to a preliminary tally by UBS-International Council of
Shopping Centers, sales slid 0.5 percent versus its original
estimate of 1 percent growth. The results, based on same-store
sales or sales at stores opened at least a year, were the weakest
since March 1995, when the industry registered a decline of 0.8
percent.
The retail industry already had been bracing for a weak March
because Easter landed two weeks earlier than last year, on March 23
when winter weather still gripped most of the country. It was the
earliest in 95 years. Retailers also had one less shopping day in
March compared to a year ago.
A deteriorating economy, soaring food and gas prices, limited
credit and slumping home prices shook shoppers further. The
Conference Board, a business-backed group, said late last month
that consumers' outlook for the economy was the gloomiest in 35
years.
Food prices have been soaring. In February, the price of cereal
and bakery products shot up by 1.8 percent, the largest monthly
increase since January 1975, according to the Labor Department. A
gallon of milk is now close to $4; a dozen eggs more than $2. The
higher costs partly reflect rising energy prices, which increase
transportation costs.
At the pump, the national average price of a gallon of gas rose
1.4 cents overnight to a record $3.357 a gallon, according to AAA
and the Oil Price Information Service. Prices have set a string of
records in recent weeks, and are 56 cents higher than a year ago.
With the peak summer driving season still to come and crude oil
prices rising too, gas may reach the retail price of $4 a gallon
that the Energy Department has been forecasting.
A sluggish job market is adding to worries. On Thursday, the
Labor Department said that applications for jobless benefits
totaled 357,000 last week, down by 53,000 from the previous week.
Even with the improvement, the four-week average for claims rose by
2,500 to 378,250, the highest level since early October 2005.
While many economists believe that the country is in a
recession, the Bush administration says that growth should revive
this summer when 130 million households start spending their
economic stimulus checks. Any boost in sales could be temporary,
however, as analysts believe many shoppers will use a chunk of the
money to pay down debt.
Michael P. Niemira, chief economist at the International Council
of Shopping Centers, says that the malaise could continue into
2009. The rebate checks, he says, will "buy retailers some time,"
but without an improvement in key areas like housing, a recovery in
spending won't happen anytime soon.
Niemira expects that for the combined March-April period -
retailers' key spring selling period - sales will be up only about
1 percent. That pace is below the 2.1 percent average seen last
year, which was slower than the 3.6 percent figure in 2006.
Wal-Mart was a bright spot. It reported a 0.7 percent gain in
same-store sales, excluding sales results from fuel. That was
slightly below the 1.0 percent estimate by analysts surveyed by
Thomson Financial, however.
Wal-Mart still raised its first-quarter earnings outlook because
of better inventory controls that yielded fewer markdowns and
reduced store theft. The company also benefited from strong sales
of groceries, video games and other electronics.
Rival Target Corp., which has been stumbling lately, posted a
4.4 percent decline in same-store sales. Analysts had expected a
2.7 percent decrease.
Costco posted a 7 percent gain in sales, higher than expected,
with much of the gain coming from gasoline sales.
Many department stores and apparel chains suffered, though.
Among department stores, J.C. Penney posted a
larger-than-expected 12.3 percent sales decline. The department
store retailer had warned late last month that same-store sales
would be down at least 10 percent amid a souring economy.
Saks reported a 2.9 percent decline in same-store sales, worse
than the 3.5 percent gain that Wall Street anticipated. Nordstrom
had a 9.1 percent decline in same-store sales; analysts had
expected an 8.0 percent drop.
Limited Brands reported an 8 percent drop in sales. Gap had an
18 percent drop in same-store sales, dragged down by a 27 percent
drop at its Old Navy division.
Teen merchants, which typically are more recessionary proof than
other categories, stumbled last month, too. After filling the
family car's gas tank, teenagers may have little left over for that
new pair of sneakers or a skirt.