Improvement in retail sales despite wary consumers
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 [...]
January Retail Sales Up – Retailers bullish
SAN FRANCISCO (Reuters) – January sales at top U.S. retail chains should rebound into positive territory from last year’s decline as shoppers redeemed holiday gift cards and retailers avoided drastic clearance sales.
Retailers ranging from Target Corp to J.C. Penney Co Inc to American Eagle Outfitters Inc will report January sales on Wednesday and Thursday. Sales at stores open at least a year, or same-store sales, are forecast to rise 2.4 percent compared with a drop of 5.7 percent last year, according to Thomson Reuters data.
The figures could mark the fifth consecutive monthly sales increase after a year’s worth of declines during the recession, as consumers slowly return to spending and retailers lower prices to match a more circumspect shopper.
January is seen as the least important month of the holiday fourth quarter, accounting for the smallest portion of its sales. But retailers including Aeropostale Inc, Gap Inc and TJX Cos Inc could raise their earnings forecasts when they report sales results, analysts said, helped by demand from bargain-hungry shoppers and improved margins.
Comments retailers make about sales trends and whether traffic weakened significantly at the end of January will also give clues on how consumers might spend in the first quarter.
Some analysts worry stronger-than-expected holiday sales pulled spending forward and retailers could face an uphill battle luring shoppers in the first quarter, especially if cold weather crimps demand for spring merchandise.
“We want to get a sense of consumer sentiment and their appetite to continue to spend after they just spent quite a bit during the holiday,” said Wedbush Securities analyst Betty Chen.
DISCOUNTERS DOMINANT AS TEEN RETAILERS STRUGGLE
By category, the best sales performance in January is expected to come from discount chains such as Costco Wholesale Corp or BJ’s Wholesale Club Inc, where same-store sales are forecast to rise 4.5 percent. Wal-Mart Stores Inc, the top discounter, no longer reports monthly sales.
Traffic at discount retailers has risen during the economic downturn as shoppers seek bargains on TVs, food and medicine.
But upscale shoppers are once again spending as the stock market stabilizes, Wall Street bonuses bounce back and high-end retailers introduce lower-priced merchandise.
Michael Gould, chief executive of upscale department store Bloomingdale’s, which is owned by Macy’s Inc, told Reuters at the opening of its store in Dubai that the retailer had a “wonderful” fourth quarter in the United States.
“I think January is the strongest month we have had probably in a year and a half,” he said.
Macy’s same-store sale are expected to decline 0.1 percent, compared with a drop of 4.5 percent last year.
The worst performance is expected from teen and child apparel retailers, where sales are forecast to decline 0.8 percent. The category is on track to post its 19th consecutive drop in same-store sales, according to Thomson Reuters data.
Jharonne Martis, director of consumer research for Thomson Reuters, said retailers were helped by shoppers redeeming holiday gift cards in the month.
“Consumers are spending, but they’re spending on basic necessities or at a discount,” Martis said. “Even though the high-end consumer … is spending a little bit more than they did last year, it’s not as big as we saw back in 2007.”
HO HUM FIRST QUARTER?
Total holiday retail sales in November and December rose 1.1 percent, according to the National Retail Federation, beating the trade group’s forecast for a 1 percent drop.
Retailers prepared for muted demand this holiday season by stocking less merchandise, allowing them to avoid profit-crunching price cuts in January.
“They were not very aggressive on their promotions, so that should help many of them raise their EPS guidance,” Chen said.
But the outlook for 2010 is muted. The NRF expects sales to rise 2.5 percent. Aside from the past two years, that would mark the lowest year-over-year increase since 1995.
Martis said unemployment could derail same-store sales if it ticks higher. Chen said retailers need to show they can do more than simply stabilize sales to win investors’ favor, including reversing a trend of declining traffic in January.
“What we’re going to need is a top line recovery in order to deliver earnings growth above last year’s results,” Chen added.
(Reporting by Nicole Maestri; editing by Andre Grenon)
Family Dollar beats Street view, sending shares up
NEW YORK (Reuters) – Family Dollar Stores Inc (FDO.N) reported a higher-than-expected quarterly profit as the discount retailer drew more shoppers, and it forecast earnings for the current quarter above Wall Street estimates.
This quarter began on November 29, and Family Dollar estimated that sales at stores open at least a year rose 4 percent in the busy holiday shopping month of December.
The North Carolina retailer, which sells most of its merchandise for below $10, said net income rose 14 percent to $67.6 million, or 49 cents per share, in the first quarter that ended November 28 from $59.3 million, or 42 cents per share, a year earlier.
Analysts on average were expecting earnings of 47 cents per share, according to Thomson Reuters I/B/E/S.
Last month, Family Dollar reported that first-quarter net sales rose 3.9 percent to $1.82 billion, while same-store sales rose 2.4 percent — below its estimate for growth of 3 percent to 5 percent.
At the time, it said it still expected earnings to fall within its forecast of 45 cents to 50 cents per share.
For the second quarter, the retailer forecast same-store sales would rise by 2 percent to 4 percent, and that earnings per share would range from 65 cents to 70 cents. Wall Street analysts are forecasting a profit of 64 cents per share during the current quarter.
For the full fiscal year, Family Dollar forecast net sales will rise 4 percent to 6 percent, with earnings per share ranging from $2.15 to $2.35.
The company’s shares rose $1.51, or 5.5 percent, to $29.00 in premarket trading.
(Reporting by Phil Wahba and Nicole Maestri; Editing by Lisa Von Ahn)
