Wal-Mart, Other U.S. Chains' Sales Below Forecasts
from bloomberg
By Heather Landy
New York, Jan. 4 (Bloomberg) -- U.S. retailers' December same- store sales rose 0.7 percent, resulting in the worst holiday season since 1995, as higher fuel prices, declining stock markets and winter storms curbed consumer spending.
Wal-Mart Stores Inc., the world's largest merchant, said sales at stores open at least a year rose 0.3 percent from December 1999, compared with growth of more than 9 percent the past two Decembers. Sears, Roebuck & Co. said it would close 89 specialty and department stores after sales unexpectedly dropped.
With November's 4 percent rise, sales in the two-month holiday period gained 2.3 percent, Bank of Tokyo-Mitsubishi Ltd. economist Mike Niemira said. Yesterday's interest-rate cut by the Federal Reserve fueled optimism that sales will improve in coming months. Still, it came too late to save profits in the fourth quarter, which for many retailers ends later this month, analysts said.
``It'll be six to nine months before the rate cut would provide a boost to consumer spending,'' said analyst Bart Glenn of Invesco Funds Group Inc. in Denver, which holds retail stocks including Wal-Mart, Target Corp. and Kohl's Corp. ``For earnings performance, it'll still be difficult.''
The holiday season coincided with a drop in confidence in the U.S. economy. The Conference Board's consumer confidence index fell to a two-year low last month, and helped build the case for cutting the overnight bank-lending rate by a half-percentage point, said Bear, Stearns & Co. economist Melanie Hardy.
The Fed might cut rates another 25 or 50 basis points after its Jan. 30-31 meeting, she said.
``I think the Fed has more work to do,'' Hardy said. ``Fifty basis points isn't going to be enough to turn this thing around.''
The sales gain for the November-December season is the smallest since 1995's 2.1 percent, Bank of Tokyo's Niemira said.
Sales
The 0.7 percent increase in December same-store sales, based on results at 81 chains, was the smallest rise for the month since at least 1969, Bank of Tokyo's Niemira said.
While the higher inflation rates of the 1970s and 1980s skew the historical comparison, December's results still are well below the 4.3 percent average sales gain of the last 10 years, when inflation rates were more comparable, Niemira said. Sales rose 6.7 percent in December 1999.
Niemira yesterday lowered his initial 4 percent forecast to as low as 2 percent, as stores reported disappointing levels of shopper traffic, the need to take steep discounts on merchandise and the impact of ice and snowstorms in the central states and parts of the East Coast.
Same-store sales are a key measurement of a retailer's business because they exclude sales from new and closed stores.
Profit Forecasts
Sluggish sales led several chains to cut profit forecasts for the fourth quarter.
Limited's December same-store sales were unchanged, missing estimates for as much as a 5 percent gain. The apparel merchant cut its profit forecast for the quarter ending Feb. 3 to between 55 cents and 57 cents a share. The average estimate of analysts surveyed by First Call/Thomson Financial was 70 cents.
Abercrombie & Fitch Co. said December same-store sales slid 11 percent. It estimates fourth-quarter profit of 73 cents to 75 cents a share. Analysts had expected 82 cents, according to First Call.
Tiffany & Co.'s sales rose 2 percent, below forecasts. It estimates fourth-quarter profit of 56 cents a share, less than analysts' average forecast of 64 cents.
Wal-Mart, Sears
Wal-Mart said on a recorded call that same-store sales for the quarter will fall below its forecast for a 3 percent to 5 percent gain, the range upon which the company based its profit estimate of 46 cents to 48 cents a share. Earnings still ``should be up'' from the year-ago quarter's 43 cents, the company said.
Wal-Mart said December sales rose 0.5 percent at its discount stores and fell 0.3 percent at its Sam's Club wholesale warehouse chain, for a companywide increase of 0.3 percent. The Bentonville, Arkansas-based merchant was up against a tough comparison with last December, when sales jumped 9.1 percent.
Unlike last year, Wal-Mart didn't have the benefit of the Year 2000 computer-bug concerns that prompted shoppers to stock up on batteries and hardware. Those were among the poorest-performing categories at Sam's Club last month, the company said.
Ice and snowstorms also hurt sales at stores in the Midwest and East Coast. Wal-Mart said its discount-store sales were strongest in the West. Pier 1 Imports Inc. said adverse weather in the central and eastern U.S. curbed shopper traffic.
Sears said its December sales fell 1.1 percent, compared with forecasts that ranged from no change to a gain of 1 percent. The biggest U.S. department-store retailer said it plans to take a $100 million fourth-quarter charge related to the closing of 53 NTB National Tire & Battery centers, 30 hardware stores and 4 department stores. The closings will eliminate 2,400 jobs.
Sears shares rose $1.05 to $37.08 in midafternoon trading. Wal-Mart declined 63 cents to $57.81.
`Significant Discounting'
Many chains lured shoppers with steep price cuts, reducing the amount of profit made on each sale.
``Our sales were driven primarily by price, not product, which significantly affected our margins,'' Gap Inc. President and Chief Executive Millard Drexler said in a statement.
Gap, the largest apparel merchant, said December same-store sales dropped 6 percent. While the owner of Gap, Banana Republic and Old Navy still may meet the average fourth-quarter earnings estimate of 36 cents a share, the potential for further price cuts this month may shave profit by 3 cents to 5 cents, Chief Financial Officer Heidi Kunz said in a statement.
``We've seen some pretty significant discounting,'' Wells Fargo Van Kasper analyst Jennifer Black said. ``When the consumer traffic didn't show up, retailers got nervous.''
Target Corp. Chairman and Chief Executive Bob Ulrich said in a statement that the discount and department-store retailer will ``meet or exceed'' the 58-cent average earnings estimate on First Call, even though sales in December dropped 0.1 percent.
Other Results
Not all retailers lagged December sales forecasts. Talbots Inc. said sales rose 13 percent. The chain raised its fourth- quarter profit forecast to 46 cents to 48 cents a share. Analysts had expected 43 cents.
J.C. Penney Co. said sales at its department stores fell 1.6 percent, a smaller drop than the 5 percent decrease forecast by Bank of Tokyo's Niemira. American Eagle Outfitters Inc. yesterday said sales rose 12 percent, compared with analysts' forecasts for a percentage gain in the mid-single digits.
RadioShack Corp. said same-store sales rose 8 percent in December, in line with its forecast. Shares of the electronics retailer jumped $5.81 to $50.31.
Best Regards, J.T. |
