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.
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