Retailers Post Lackluster Sales, but Some Lift Profit Forecasts
Top U.S. retailers posted January sales at the low end of expectations Thursday, but some of the biggest names -- including Wal-Mart Stores Inc. -- nudged up profit forecasts as they kept costs down.
January is traditionally a lackluster month for U.S. retailers, marked by clearance sales to get rid of leftover holiday merchandise and make room for spring clothing. But many chain stores kept inventories lean going into the holidays last fall, leaving less merchandise to discount.
Retailers have been struggling to boost sales with rising fears about job security, a possible war with Iraq and a stop-and-go economy. But many have managed to keep costs down, insulating earnings growth.
Overall, January sales showed a modest 1.8% year-over-year gain, according to Bank of Tokyo-Mitsubishi, which tracks results from 80 retail chains. January tends to have the smallest monthly sales total of the year, the report said.
Sears, Roebuck & Co. bucked the trend by forecasting first-quarter profit far below Wall Street estimates. Its sales at stores open at least a year -- a key measure of retail health -- dropped 8% in January.
“It’s really a tale of two cities, where the winners like Wal-Mart and Target [Corp.] are able to survive and thrive, almost, in this environment, while some of the laggards ... are struggling to find their place in the retail sector,” said Bill Dreher, a retail analyst with WR Hambrecht.
Wal-Mart, the world’s biggest retailer, said its same-store sales rose 2.3% in January. That was at the low end of the company’s 2% to 4% forecast and well below the 8.3% gain in January 2002.
Still, Wal-Mart said it expected earnings for the year ended Jan. 31 to be about $1.80 a share, a shade higher than the average of analysts’ estimates of $1.78 reported by Thomson First Call.
Wal-Mart reports quarterly earnings next week.
J.C. Penney Co. also raised its quarterly earnings forecast, even as its January same-store sales fell a worse-than-expected 3.8%. The retailer expects to earn at least 65 cents a share in the fourth quarter. Analysts were looking for a 63-cent profit.
Target, the No. 2 U.S. discount chain, said its January same-store sales dipped 0.4%, below its expectations.
“Although our sales momentum is relatively weak, our financial performance for 2002 remains on track,” the retailer said, pointing to strong gross margins and higher profit in its credit card operations.
Wal-Mart shares rose 5 cents Thursday to $46.79, while Sears dropped $2.23 to $23.31, J.C. Penney fell 35 cents to $18.89 and Target fell 67 cents to $27.20, all on the New York Stock Exchange.
