Stores Post Sluggish November Results
Retailers on Thursday reported lackluster sales growth in November, further evidence that a steady drumbeat of advertised sales and in-store discounting failed to sufficiently motivate recession-wary shoppers. The sluggish results will put even more pressure on retailers struggling to squeeze modest profits from the holiday season.
Sales at stores open for at least a year, an important retail industry yardstick, rose by just 2%, the smallest November increase since the recession year 1990, according to Bank of Tokyo-Mitsubishi.
Discounters, again led by Wal-Mart Stores Inc., continued to post the strongest results, but there was enough pain to span the retailing spectrum. Sales at apparel company Gap Inc. stores open for at least a year plummeted by 25%, and discounter Kmart Corp.’s same-store sales slid by 2.6%.
Concern over growing unemployment and unseasonably warm weather that dulled demand for sweaters and coats combined to keep consumers out of stores. But, analysts said November sales figures might have been even worse if not for a quirk of the calendar that added a week to the retail industry’s fiscal year.
Bad news for retailers, though, could translate into bargains for savvy shoppers.
“When it comes to aggressiveness, bargains, promotions and values, you haven’t seen anything yet,” said Richard A. Feinberg, director of the Purdue University Center for Customer-Driven Quality. “Retailers are going to be that much more desperate. They can’t afford to get stuck.”
November’s overall weak showing didn’t surprise retail industry observers.
“We came into the holiday season expecting soft sales, and that’s pretty much what the [November] numbers are confirming,” said Richard L. Church, a retail analyst with Salomon Smith Barney. “The numbers don’t indicate that retailers are into a free fall by any stretch, but clearly consumers have downshifted a bit in terms of what they’re willing to spend.”
Same-store sales during November rose by just 1.9%, according to another closely watched survey of retailers conducted by TeleCheck Services Inc., a Houston-based check acceptance company. The slight gain would bruise retail company profit margins because it comes on top of a 1% inflation rate, said William Ford, TeleCheck’s senior economic advisor.
How deep discounts go during the remainder of the holiday season “will depend on how heavily a store has stocked its shelves,” Ford said. “Most of them are pretty thin, so if consumers do come in during the next few weeks, they might not have to discount more heavily than they did last year.”
Gap’s same-store sales for the four-week period ending Dec. 1 fell 25%, while overall sales fell by 14% and “significantly missed our expectations,” Gap Chief Financial Officer Heidi Kunz said. It’s “reasonable,” Kunz said, to assume that poor sales will continue through to the end of the year. Gap shares closed up 62 cents at $14.20 on Thursday on the New York Stock Exchange.
Also on Thursday, Gap cautioned that fourth-quarter earnings would be “considerably worse” than a 6-cent loss reported in the third quarter.
Gap and other apparel retailers in cold-weather states blamed unseasonably warm temperatures for cutting demand for sweaters and other winter apparel. But weak performances across the company’s Gap, Banana Republic and Old Navy chains is being driven by “the fact that there’s nothing compelling out there in terms of a fashion statement that draws people into their stores,” Feinberg said.
Wal-Mart’s sales for the month ended Nov. 30 rose by 16% from a year ago. Sales at stores open for at least a year rose by 4.3%. While the Wal-Mart division hit sales targets for November, the Sam’s Club chain lagged forecasts. Wal-Mart shares closed down 95 cents at $55.62 in NYSE trading.
Costco Wholesale Corp. said that sales rose by 10% for the four-week period ended Dec. 2, and that same-store sales rose by 4%.
Target Corp. reported that sales for the four-week period ended Dec. 1 rose by 19.4%. Same-store sales at Target stores open for a year rose by 13.5%, but the Marshall Field’s division managed just a 2.6% increase. Target shares closed down 95 cents at $38.67 on the NYSE.
Target’s strong showing, though, was driven by the additional week created by the calendar. The 13.5% same-store gain for November turns into a 0.1% drop when comparable sales are adjusted for the calendar.
Kmart said sales during the four-week period ended Nov. 28 fell by 1.9%. Kmart Chairman Chuck Conaway blamed advertising and promotion cuts for causing customer traffic in stores to slip.
Sears, Roebuck & Co. blamed weakness in apparel and seasonal merchandise for same-store sales that fell by 1.3% during the four-week period ended Dec. 1. Overall sales during the period were flat at $2.86 billion.
Best Buy Co.’s sales for the fiscal third quarter ended Dec. 1 rose by 27%, and same-store sales rose by 1.6%. Best Buy said that earnings will grow by more than 30% during the quarter.
Circuit City Stores Inc. said that fiscal third-quarter sales rose by 6%. Sales at stores open for a year fell by 4%.
