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Better inventory management helps American Retailers weather February snow

March 5, 2010 By Leave a Comment

U.S. retailers posted their best monthly sales performance since just before the recession started in 2007, as lean inventories meant they did not need to resort to steep discounts. The February results are the latest indication that consumers are coming out of hibernation, although many of the largest retailers do not report monthly sales data.

Three-quarters of the 28 retailers in the Thomson Reuters index beat expectations. Sales could have been even better, but record-setting snow in much of the eastern part of the country curbed gains, retailers said. “We’re going on four or five months here of continuous incremental growth,” said Janet Hoffman, global managing director of Accenture’s Retail practice. “It’s not breakaway spending, but I think that there is enough evidence to tell us that the consumer is happy to be back in the marketplace shopping.”

Sales Increase

Even retailers in sectors that have struggled in the past year, like department stores, were able to beat expectations. Macy’s said sales at stores open at least a year increased 3.7 percent in February, and Dillard’s reported a 2 percent rise. Teen apparel retailer Abercrombie & Fitch Co, another long-time laggard, posted a surprise 5 percent increase in same-store sales instead of the 6.9 percent decline analysts on average expected.

“Retailers have really done a great job of limiting their inventories, so they weren’t stuck with a lot of stuff that they had to drastically mark down,” said Ken Perkins, president of Retail Metrics. The Standard & Poor’s Retail Index closed up 1.3 percent on Thursday, its highest level since December 2007, while the S&P 500 was little changed. Since the start of February, the retail index has risen 7.5 percent, outpacing a 2.8 percent gain for the S&P 500.

Top gainers included Abercrombie, whose shares rose 14.6 percent; fellow teen retailer Zumiez, up 10 percent; and Family Dollar Stores Inc, up 8.1 percent after the low-priced chain raised its quarterly earnings forecast. February, typically the slowest sales month of the year, also benefited from weak comparisons with the year-earlier month, when consumers reined in spending during the depth of the recession, shopping only for deeply discounted merchandise. Macy’s same-store sales would have risen 5 percent without the snow, Chief Executive Officer Terry Lundgren said in a statement.

The Thomson Reuters same-store sales index rose 4 percent in February, compared with expectations for a 2.9 percent rise and a year-earlier drop of 4.7 percent. This year’s results were the best for February since 2005, when same-store sales rose 5.7 percent, according to Thomson Reuters. February sales also showed the biggest gain since November 2007, a month before the recession started, said Michael Niemira, chief economist for the International Council of Shopping Centers. ICSC’s same-store sales index rose 3.7 percent in February, and the group forecast a 2.5 percent increase for March.

March sales will benefit from an earlier Easter than last year. But the U.S. economic recovery is still tentative. U.S. consumer confidence sagged to a 10-month low in February amid worries about unemployment and government gridlock, which could also cap any rebound in the retail sector. At the same time, shares of many retailers have had a strong run in the past month and are getting expensive, said Wall Street Strategies analyst Brian Sozzi.

“The discount sector’s stocks still have value, but specialty retailers are coming to the point where they are fully valued – you want to pull back on some of these stocks,” Sozzi said. “The second half of 2010 will be tough because it will be hard to keep improving their gross and operating margins.”

Teen retailers like Abercrombie and Zumiez were a surprise bright spot as younger customers seemed to take to spring fashion. Sales of denim were strong at chains like Buckle Inc and Wet Seal, helping a sector that had been expected to lag. Gap Inc also surprised as same-store sales rose 3 percent, compared with expectations for a 1.8 percent increase.

Lower-priced retailers also fared well, with Target Corp posting a 2.4 percent increase, compared with analysts’ expectations for a 1 percent gain. TJX Cos Inc had a 10 percent rise, beating an 8.9 percent estimate. Family Dollar posted a same-store sales rise of 3.6 percent for the quarter that ended February 28 and said it expected earnings for the period to beat analysts’ estimates.

Snowfall at times shut down cities including Philadelphia, Baltimore and Washington last month. Even in Manhattan, heavy storms on February 10 and February 25 made it difficult to get around. That may have limited traffic in stores, but the higher selling prices lifted sales, analysts said. And the snow missed the three-day weekend that included Valentine’s Day and Presidents Day, key shopping days in February.

Monthly sales data provide a snapshot at certain retailers but are less reliable as a measure of the economy as a whole, since industry leader Wal-Mart Stores Inc and other major companies like Best Buy Co Inc and Amazon.com do not report sales figures each month.

Filed Under: Global Retail Tagged With: , , ,

Improvement in retail sales despite wary consumers

February 24, 2010 By Leave a Comment

For retailers that sell everything from toilet paper to refrigerators, 2010 may be more about winning sales from competitors than about getting consumers to buy a lot more of their merchandise. Discounters like Target Corp and Sears Holdings Corp’s Kmart stores posted improved sales performances on Tuesday, while home improvement retailer Home Depot Inc and department store chain Macy’s also forecast better sales in 2010.

Many of them saw demand pick up for items that sat out the recession on store shelves, but cautioned investors that they don’t expect a huge improvement in sales trends this year while unemployment remains high. “You are going to see these times where you have consumer explosions, where business will pick up for five or six days, but then they are going to go down again to lower levels,” said Britt Beemer, founder of America’s Research Group, which monitors consumer sentiment.

Sale

That raises the competitive stakes for store chains, whose investors are focused on seeing better sales after more than a year of cost-cuts and store closings. “While we still see little meaningful near-term improvement in macro-economic conditions, we do believe there is opportunity to gain market share by increasing same-store sales,” said Macy’s Chief Executive Terry Lundgren.

Lundgren’s view was bolstered by a new survey that showed U.S. consumer confidence fell in February to the lowest in 10 months, as consumers’ short-term outlook for the jobs market worsened, according to the conference board. Macy’s nevertheless said it expects a 1 percent to 2 percent increase in sales at stores open at least a year for the current fiscal year, compared with a 5.3 percent decline last year.

Shares tracked by the Standard & Poor’s Retail Index were off 0.2 percent in afternoon trading. Target slipped 0.8 percent and Sears 1.3 percent, while Macy’s rose 1.3 percent. Home Depot, whose quarterly results suggested continued gains against rival Lowe’s Cos Inc, rose 1.9 percent.

Shopping for more paint

One positive sign is that customers of both Home Depot and Lowe’s were more willing to spend on big-ticket home projects such as painting, new flooring and renovating kitchens after a prolonged slump in the U.S. housing market. Home Depot posted its first quarterly same-store sales rise in nearly four years.

Target has seen customers adding a few more home improvement and apparel items to their baskets, not just buying essentials like food, and expects sales of such discretionary merchandise to improve. “Today, guests are telling us they’re increasingly confident and are visiting more often and shopping more of the store,” Kathee Tesija, Target’s executive vice president of merchandising, said during a conference call with analysts.

But consumer caution was also evident in weekly sales numbers. The ICSC/Goldman Sachs same-store sales index rose 0.9 percent in the week ended February 20, compared with a year earlier. ICSC research forecasts a 2 percent rise in February same-store sales overall.

Macy’s posted fourth-quarter profit of $1.40 per share, excluding onetime items, compared with an average analyst estimate of $1.37 per share, according to Thomson Reuters.

Home Depot posted a profit that beat analysts’ expectations in the quarter, compared with a year-earlier loss. It forecast increases of about 2.5 percent in both total and same-store sales for this fiscal year, while net earnings from continuing operations should rise about 15.5 percent to $1.79 a share.

Sears loses ground to Home depot, Lowe’s

Sears’ profit more than doubled, largely on cost cuts, as its same-store sales still fell 2.5 percent. But the Sears chain appears to be losing market share to Home Depot and Lowe’s, which have invested to improve their stores, said Credit Suisse analyst Gary Balter.

“Would you rather be in the lower multiple names that offer better growth or the higher multiple name that, other than some very effective Internet advertising, operates in stores that have been underinvested in for years?” Balter said in a research note.

Target slightly beat analysts’ estimates as it avoided drastic clearance sales that crimped results in the holiday quarter last year. Sales at stores open at least a year, a key gauge of a retailer’s health, rose 0.6 percent. In the past year, Target reduced inventory and touted low prices to win back consumers who stopped shopping in its stores during the downturn. It is also renovating hundreds of stores to add more fresh food and groceries.

Target said the current Wall Street first-quarter earnings estimate is above its own forecast.

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Retail Sales results for January brighten recovery picture in America

February 13, 2010 By Leave a Comment

WASHINGTON (Reuters) – Sales at retailers were unexpectedly strong last month, suggesting consumers were feeling a little more comfortable to spend and improving prospects for first-quarter economic growth. Retail sales rose 0.5 percent as consumers stepped up spending not only on essential goods but luxury items as well, the Commerce Department said on Friday.

Optimism over the increase was tempered by a separate report showing that consumer sentiment ebbed slightly early this month. But analysts dismissed the slip as insignificant and focused on the gain in sales as a hopeful economic sign.

Christmas Sales

“After considerable hand-wringing about the underlying strength of retail sales in the past few months, this is a solid report. It indicates the recovery is on track,” said Brian Bethune, chief U.S. financial economist at IHS Global Insight in Lexington, Massachusetts.

Retail sales are being closely watched to determine whether consumers can sustain the economy’s recovery once government stimulus and the boost from restocking by businesses wanes. Not only did the January sales increase come in above the 0.3 percent economists had forecast, sales data for December and November were revised upward as well. Compared to January last year, sales increased 4.7 percent.

While the report on consumer confidence showed worries over unemployment were weighing on sentiment, the slight slip left intact a longer-term trend toward improvement. The Reuters/University of Michigan Surveys of Consumers’ preliminary index of sentiment came in at 73.7 for February, down from 74.4 in late January but up from 56.3 a year ago. Analysts had expected a rise to 75.0.

“February’s retracement does not seem to signal a fundamental shift in sentiment and is not likely to mean much for spending patterns in the months ahead,” said Stephen Stanley, chief economist at RBS in Stamford, Connecticut.

CHINA HURT STOCKS

Worries that a surprise move by China to raise bank reserve requirements could hurt the global recovery, overshadowed the retail sales report, hurting U.S. stocks. The dollar neared a nine-month high against the euro, helped by skepticism over a proposed rescue deal for debt-stricken Greece.

The U.S. economy has grown for two straight quarters following the worst downturn since the Great Depression of the 1930s. Growth in the fourth quarter came in at a 5.7 percent annual rate, the fastest in six years. Analysts, who are also tracking the impact of recent severe winter weather on the economy, said the year’s strong start to sales bodes well for first-quarter spending and growth.

“Even folding in potentially weak February consumption as a result of severe weather and automaker difficulties, it appears that real consumer spending is on a 2.5-3 percent quarterly trajectory,” said Steven Wieting, an economist at Citigroup in New York. Core retail sales, which correspond most closely with the consumer spending component of the government’s gross domestic product, rose 0.8 percent after falling 0.3 percent in December. Consumer spending rose at a 2 percent annual rate in the fourth quarter.

While the U.S. recovery is gaining momentum, Europe has faltered. GDP in the 16-country euro-currency zone rose only 0.1 percent in the fourth quarter from the prior quarter, well short of the 0.4 percent rise that lifted it from recession in the third quarter. A second report from the Commerce Department showed U.S. business inventories slipped 0.2 percent in December after rising 0.5 percent in November.

Analysts said the decline was smaller than the government had estimated when it released figures on fourth-quarter economic growth last month and, together with upward revisions to retail sales, would offset the negative impact on fourth-quarter GDP from a bigger than expected trade deficit. Motor vehicle and parts purchases were flat last month, after rising 0.1 percent in December. Excluding motor vehicles and parts, retail sales rose 0.6 percent in January after slipping 0.2 percent the prior month.

Electronics and appliance stores saw a rebound in sales and consumers continued to splurge on sporting goods, hobby-related items, books and music last month. Sales at general merchandise stores rose 1.5 percent in January, the biggest gain since February 2009.

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