Retail Joins Slump With Poor Sales
Merchants Report Worst January Performance in Four Decades
A family shops at a Target in Raleigh, N.C. The chain reported a decline in same-store sales of 1.1 percent drop owing to shoppers' concerns with, among other things, high gas and food prices and a slumping housing market.
(By Jim R. Bounds -- Bloomberg News)
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Friday, February 8, 2008
NEW YORK, Feb. 7 -- The nation's retailers delivered more evidence of a stumbling economy Thursday, as merchants reported their weakest January performance in nearly four decades.
The sales figures made it clear that consumers wrestling with high gas and food prices, a slumping housing market, an escalating credit crisis and a weakening job market retrenched further. The disappointments cut across all sectors, including discounters such as Wal-Mart Stores, teen retailers including Pacific Sunwear of California and mall-based apparel chain Limited Brands. Even affluent shoppers are pulling back, hurting such stores as Nordstrom.
"Clearly, this is a reflection of a very difficult environment for the consumer," said Ken Perkins, president of Retail Metrics, a research company in Swampscott, Mass. "It looks like consumer spending is stalling."
But many retailers either backed their earnings forecast or even raised guidance, signaling that they were able to control their inventories. Hot Topic and Wal-Mart stuck with their earnings forecast, while Pacific Sunwear, Wet Seal and Gap raised their profit outlooks despite sales drops.
The UBS-International Council of Shopping Centers preliminary sales tally of 43 retailers rose 0.5 percent in January, well below the original 1.5 percent forecast. The results followed an anemic 0.7 pace in December and were below last year's same-store sales average gain of 2.1 percent. Same-store sales are sales at stores that have been open at least a year.
Some retailers' efforts to control inventories are expected to salvage their earnings; they're also likely to pare merchandise offerings further in the coming months to respond to slowing demand.
Wal-Mart, the world's largest retailer, reported a 0.5 percent gain in same-store sales. The company said that it continues to do well with staples such as groceries but that home furnishings remain weak. Wal-Mart noted in its news release that gift card redemptions were below expectations and that customers appear to be holding gift cards longer and "using them more often for food and consumables rather than discretionary purchases."
Wal-Mart's rival Target reported a 1.1 percent decline in same-store sales in January, while Costco Wholesale reported a 7 percent gain.
J.C. Penney's same-store sales fell 1.9 percent, Nordstrom's dropped 6.6 percent, but Saks said sales rose 4.1 percent.
Limited Brands reported an 8 percent drop, and Gap posted a 2 percent decline in same-store sales.
