Retail Sales Slip, but Outlook Gains
Amid a gloomy month for retail sales, signs of a bottom emerged at a few chain stores and some even lifted their profit outlooks.
Sales at bellwether Wal-Mart Stores Inc. felt the sting of rising unemployment, a late Easter holiday and lower food and gas prices. But several hard-hit apparel and department store chains raised their quarterly profit outlooks, underscoring how tighter inventories and cost cutting are helping improve margins.
These new glimmers of life come after the industry's first year-over-year gain in February after four consecutive months of declines. Consumer confidence is rebounding with the stock market, bolstering hopes that the steep sales drop in the fourth quarter has abated. Still, joblessness and frozen credit markets continue to weigh on consumer spending.
"It's going to be a long, slow 'U' shaped recovery, not a 'V'," said Ken Perkins, president of market researcher Retail Metrics Inc. The government gives its estimate of a broader measure of March retail sales -- including grocery stores, restaurants, car dealers, and gas stations -- on Tuesday.
Sales at stores open at least a year, a key indicator of the retail industry's health, fell 1.8%, according to an index of 31 retailers compiled by Thomson Reuters, after rising 0.3% in February. The decline reflects the impact of Wal-Mart, the world's largest retailer, and Easter's shift, to April 12 this year from March 23 last year. Analysts said the calendar change reduced stores' overall retail sales to the tune of 1 to 3 percentage points.
Despite some disappointment in the March figures, retail experts pointed to signs of optimism, including a rebound in housewares at Wal-Mart, Target Corp. and Kohl's Corp. The more upbeat profit forecasts indicates "the supply-demand balance is better aligned," says Barclays Capital retail analyst Bob Drbul.
Department store chain J.C. Penney Co. reported sales at stores open at least a year fell 7.2% in March, less than a forecast double-digit decline. But the Plano, Texas, retailer narrowed its first-quarter forecast to a loss of five cents to 10 cents a share, compared with a prior loss estimate of 20 cents to 30 cents a share. It cited a focus on conservative inventory planning and a better product assortment.
Target, the Minneapolis-based discount chain, posted a smaller-than-anticipated sales decline of 6.3%. "We have begun to see encouraging signs" in operations, Chief Executive Gregg Steinhafel said in a statement. Target estimates sales this month will be "essentially flat" compared with a year ago.
Wal-Mart posted relatively disappointing results for March, despite an extra selling day due to the Easter holiday shift. But Wal-Mart said it expects to see an Easter sales lift this month and predicted profit for the fiscal quarter ended April 30 would be at the high end of its 72 cents to 77 cents a share forecast.
Besides continued strength in food and health products, Wal-Mart, based in Bentonville, Ark., reported strong sales for home goods, including bedding, bath towels, cookware, furniture and lighting.
Costco Wholesale Corp. reported sales at it U.S. membership clubs rose 3%, excluding the impact of fuel deflation and despite an extra selling day in the month. Costco benefited from strong sales in food and sundries, but its non-food categories continued to be soft.
Discounters such as BJ's Wholesale Club Inc. and Family Dollar Stores Inc. continued to report strong sales gains, aided by low-price reputations. BJ's said sales excluding fuel rose 8.5% last month. Family Dollar this week posted a 6.4% gain and raised its profit outlook.
Sales at off-price chain TJX Companies Inc. rose 2%, beating estimates of a 2%-4% decline, while Ross Stores Inc. posted a 3% sales increase, compared with estimates of a 4%-6% decline.
Luxury retailers are still getting pummeled. Neiman Marcus Group Inc. and Saks Inc. posted sharp declines of 29.9% and 23.6%, respectively. Teen retailer Abercrombie & Fitch Co. posted a 34% sales decline.
"Stabilization does not mean recovery, but is a far better prospect than the freefall of late last year," said Larry Miller, managing director, RBC Capital Markets.
RACHEL DODES and ANN ZIMMERMAN Source:WSJ
- April 10,2009