A forgettable September for retailers
A slew of major U.S. retailers warned of shrinking profits after reporting that sales in September were weaker than expected.
Nordstrom Inc., J.C. Penney Co. and Stein Mart Inc. cut third-quarter per-share profit projections, along with Kohl’s Inc., Limited Brands Inc., Coldwater Creek and American Eagle Outfitters Inc. Target Corp. cut its estimate for the fiscal year. Others issued warnings earlier in the month.
Wal-Mart Stores Inc. bucked the tide, raising its projection for the quarter, even though its comparable-store sales were as frail as rival Target’s, nudging up only 1.4%, according to a report issued Thursday.
It was a dreary display for an industry heading into the most important shopping season of the year, and investors didn’t like it.
Nordstrom’s stock, for example, fell 9%, or $3.64, to $44.79, and J.C. Penney’s slipped 8%, or $4.73, to $63.27.
But Wal-Mart got a pat on the back; its shares rose 3%, or $1.31, to $46.90.
September is typically a strong month for retailers. Not this year. Sales at stores open a year or more rose 1.7% to $69.1 billion, less than half of last year’s 4% gain and the smallest September advance since 2002, according to the International Council of Shopping Centers, which monitors 49 major national chains.
Even if business picks up, “profits will be hurting this season,” said Michael Niemira, the group’s chief economist. “September is the most important month of the quarter. You fall short in September, you fall short in the quarter.”
Now stores must figure out how to unload the pants, sweaters, sneakers and sweatshirts that are filling their shelves to make way for the holiday merchandise that starts rolling in late this month. That means bargains for shoppers and pain for retailers.
“Obviously, with the holidays looming, they have to move this fall merchandise out of the stores,” said Ken Perkins, analyst with research firm Retail Metrics Inc.
If sales don’t pick up this month, more profit warnings could be ahead, he said.
Niemira had predicted a 2.5% gain at the start of September and then trimmed his estimate to 2% as it became apparent that warm autumn temperatures were crimping the sale of cool-weather clothes.
Consumers, however, are worried about much more than the weather. The weak housing market, a credit crunch and high gasoline and food prices are affecting spending.
In a report released Thursday, Thomson Financial pegged the September sales gain at 1.4%, saying that 61% of the 45 retailers it monitors reported disappointing results.
The question now is, will cooling weather unleash a wave of spending?
“There may be some pent-up demand,” said Niemira, who is expecting sales to rise 2.5% this month. “That’s the question mark out there.”
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