Warm Weather Hampers Retail Sales, haha lame excuse...

Discussion in 'Trading' started by S2007S, Oct 11, 2007.

  1. S2007S


    Warm Weather Hampers Retail Sales
    October 11, 2007 7:44 a.m.

    U.S. retailers have begun to post generally weak same-store-sales figures for September and are concurrently cutting bottom-line expectations.

    The trouble isn't just because of economic conditions and concerns, but also due to strong sales gains in September 2006 and last month's abnormal warmth across large swaths of the U.S..

    A warning by Target Corp. -- which has been one of retail's stronger performers -- two weeks ago also didn't help perceptions. It slashed its September sales-growth outlook by more than half, blaming fewer-than-expected customers.

    Among Thursday's companies to warn on profits was Limited Inc., which posted a wider-than-expected 4% drop in September same-store sales and said fiscal third-quarter earnings may miss the company's 4 cents-a-share forecast.

    The Thomson Financial Same Store Sales Index projected a 2.1% rise in September, down from last year's increase of 4.2%. Excluding Wal-Mart Stores Inc., the growth was expected to come in at 2.2%, versus a year-earlier gain of 6.3%.

    Expectations have consistently fallen in recent weeks as temperatures have risen through early October, resulting in record warmth in portions of the Midwest and Northeast. Consequently, demand for colder-weather items has been weak.

    In addition to that factor, year-over-year comparisons for the department stores and general apparel segments will likely be hurt by stout increases for September 2006 of 8.8% and 6.3%, respectively. Flat same-store sales were projected overall at department stores, with declines foreseen for teen- and general-apparel retailers.

    The weak comparisons aren't expected at high-end department stores Saks Inc. and Nordstrom Inc. They are projected to follow September 2006's double-digit increases with another set of strong gains for last month.

    A weak September is particularly worrisome given the size of the month, which spans five weeks on the retail industry's calendar. The period also marks the start of the fall season, when retailers rack up the lion's share of third-quarter profits before markdowns begin. Sales below projections for the month could result in profit warnings, and that prediction has come to pass.

    Mothers Work Inc. posted a 7% drop in September same-store sales, worse than the company's target but narrower than analysts' projected decline. In light of continued sales weakness, the maternity-clothes retailer slashed its fiscal fourth-quarter outlook to a loss of 89 cents to 93 cents a share. It had projected break-even to a loss of 27 cents a share.

    Stein Mart Inc. reported a much worse-than-expected 9.1% drop in same-store sales and widened its fiscal third-quarter loss estimate to 15 cents to 18 cents a share, which includes a 3-cent pretax charge, from 3 cents to 6 cents a share. Longtime board member Linda McFarland Farthing became president and chief executive of the struggling firm last month. Stein Mart has now four straight months of lower and weaker-than-expected sales.

    American Eagle Outfitters Inc. late Wednesday posted a surprise 2% drop in same-store sales and subsequently cut its fiscal third-quarter earnings outlook by 3 cents to 44 cents to 45 cents a share.

    On the bright side, fellow teen retailer Zumiez Inc. smashed analysts' expectations for a second-straight month with a 14% jump. In addition, Cache Inc. now sees a slight third-quarter profit.

    Last month, Wal-Mart projected a 1% to 3% increase in September same-store sales. The company started October by kicking off its holiday pricing strategy earlier than ever, a move than might have been pushed along by concerns over consumer spending. Wal-Mart cut prices 10% to 50% on its "Top 12 Toys of Christmas," and signaled more reductions are coming.

    The firm has been posting weak same-store-sales growth for several years due to a number of issues, including economic ones as well as cannibalization of sales by new stores from existing ones. Through August, Wal-Mart's same-store sales for fiscal 2008 increased 1.5% in the U.S., versus 2.7% a year earlier, excluding fuel sales. Growth for all of fiscal 2007 ended up at 2.1%, the company's weakest ever. Most recently, its sales have been hurt by its apparel and home segments, areas Wal-Mart has been struggling with amid lackluster customer reaction to the firm's offerings.

    Warehouse club rival Costco Wholesale Corp. on Wednesday posted a 6% increase, as U.S. same-store sales rose 4%.

    Target late last month warned it anticipated same-store-sales growth of 1.5% to 2.5% for the month, compared with its prior view of 4% to 6% growth. At the time, the company noted sales in the Northeast and Florida were particularly weak. Florida has been among the hardest-hit areas in the ongoing housing-market slowdown.

    At J.C. Penney Co., a 53rd week of results last year continues to skew comparisons with this year's sales. That issue, which has also affected a host of other retailers intermittently throughout 2007, had been projected to result in a low-single-digit increase in same-store sales for the department-store chain.

    Industry leader Macy's Inc. has forecasted a September decline of 1% to 3%, as the year-earlier period was aided by the company's nationwide.