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Retailers Report Slow September Sales

BY CSA STAFF

New York City, Several of the nation’s largest retailers cut their earnings forecasts Thursday after lingering summer weather and an uncertain economy kept consumers from shopping last month and left the big merchants with disappointing sales.

As the store owners reported September sales figures Thursday, the biggest losers were apparel sellers including Limited Brands Inc. and Gap Inc.

Sales are coming in soft, as expected,” said Ken Perkins, president of RetailMetrics LLC, Swampscott, Mass., in an Associated Press report. “It was a perfect storm, a combination of abnormally warm weather, high food and energy prices, a continued sluggish housing marketing and tight credit.”

Other experts warned the slowdown could extend beyond September.

“Warm weather no doubt explains part of the chill in September sales, but shoppers are also clearly telling us they want to hold the line on spending. That was the case for back-to-school spending and shoppers are also cutting their plans for Halloween and the holidays,” said Frank Badillo, senior economist for TNS Retail Forward.

Michael P. Niemira, chief economist at the International Council of Shopping Centers (ICSC), estimated the weather depressed sales results by 0.5 % point.

The ICSC-UBS tally of retail sales rose a slim 1.7% in September, compared to a 4% increase in the year-ago period and forecast for a 2.5% improvement. Excluding the impact of the weather, the results were in line with a 2.3% spending increase seen since February, the start of the fiscal year for merchants. The sales tally is based on same-store sales.

Among the retailers on Thursday reporting September sales, the results included:

Wal-Mart reported a 1.5% increase in same-store sales, slightly below the 1.8% estimate from analysts surveyed by Thomson Financial. The chain said apparel and home furnishings remain weak, and that company research continues to show that customers remain concerned about their finances, particularly the cost of living;

Target said same-store sales increased a slim 1.2% dragged down by weak apparel sales. Analysts had expected a 2.2% estimate;

Macy’s Inc. posted a 2.7% drop in same-store sales, worse than the 1% projection;

J.C. Penney suffered a 4.6% drop in same-store sales, well below analysts’ 0.1% forecast. The company slashed its third-quarter earnings forecast to $1.00 from $1.04 per share, compared to the previous guidance of $1.28;

Nordstrom Inc. had a 3.2% gain, below the 5.0% estimate. The company lowered is third-quarter profit outlook as a result of disappointing sales. It also said larger-than-planned markdowns used to clear excess inventory will hurt profits for the remainder of the year.

In the apparel segment, Gap Inc. suffered a 7% drop, worse than the 4.6% Wall Street expected. Mothers Work Inc. suffered a 7% drop; analysts had expected a 8.5% decline. Limited Brands, Inc. had a 4% drop in same-store sales, worse than the 1.5% forecast. American Eagle Outfitters Inc. announced a 2% decline in same-store sales, below the 1.2% estimate.

Some retailers managed to buck the trend, however. Same-store sales at Saks Inc. rose 7.7% in September on strong results for shoes, women’s apparel and men’s accessories. TJX Cos. Inc. said Thursday September same-store sales rose 2%, above Wall Street estimates.

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Study: Teen spending out of fashion

BY CSA STAFF

MINNEAPOLIS Teen spending in fashion declined 24%, according to a recent Piper Jaffray study. The survey found that spending decreases were most common among young women where spending was down 18%, as compared to a decline of 9% for young men.

Despite the drop in spending, the survey found that fashion is still important to teens.

“The fashion category still represents 42% of the total teen budget for the fall 2007 season despite moderation in spending habits,” said Jeff Klinefelter, senior retail research analyst at Piper Jaffray. “However, we found that spending expectations remain largely unchanged, as nearly 50% of the students plan to spend the same amount of money on apparel this season. We believe the discrepancy between budget dollars and expectations may be due to a decline in contributions from parents.”

Of the places where teens prefer to spend their money, Hollister topped the list for the sixth consecutive time, followed by West Coast Brands, American Eagle, Abercrombie & Fitch and Forever 21.

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Gap Inc. to open in the Philippines

BY CSA STAFF

SAN FRANCISCO Gap Inc. announced Tuesday that it is partnering with the Rustan Group of Companies to bring the Gap and Banana Republic brands to the Philippines. Under a franchise agreement, Gap Inc. plans to open approximately eight Gap stores and four Banana Republic stores throughout the country.

The first Gap store is expected to open by the end of this year, and the first Banana Republic stores by spring 2008. All stores are scheduled to be open by 2012.

“The Philippines represents a natural market for Gap Inc. to expand its international presence,” said Ron Young, senior vp of international strategic alliances for Gap Inc. “The country has a strong, steadily growing economy, and consumers in this market have a great interest in iconic apparel brands such as ours.”

Gap Inc. reported that the Rustan Group will hold exclusive rights to operate Gap and Banana Republic stores in the Philippines. In addition, the company said tha the Rustan Group will purchase merchandise from Gap Inc. or suppliers designated by Gap Inc., and must adhere to Gap Inc.’s quality standards to preserve the reputation of the Gap and Banana Republic brands.

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