Bad month gets worse for retail

Wal-Mart 6.3% gain is exception as most chains' sales slump

Worst Sept. in 3 decades

Attacks on U.S. kept buyers from all but necessities, discounts


A slowdown in consumer spending that worsened after the Sept. 11 terrorist attacks left a majority of national retail chains with dismal sales last month - the weakest performance of any September in three decades.

Many of the national chains, which reported monthly sales yesterday, warned of weaker-than-expected third-quarter profits and said they'd been forced to trim expenses and cut back on inventory.

Sales rose a modest 0.8 percent in September, led by Wal-Mart Stores Inc., which posted a 6.3 percent sales gain in stores open at least a year, according to the Bank of Tokyo-Mitsubishi's index of 78 chain stores. Excluding Wal-Mart, the industry would have shown a 2 percent decline, said Michael P. Niemira, a vice president with the Bank of Tokyo.

"The shortfall I would attribute largely to the fallout from Sept. 11," Niemira said yesterday. "It was a widespread effect" as stores and malls closed on the 11th and consumers put off shopping for anything but staples in the weeks that followed.

Sixty-two percent of chains in the bank's tally posted sales declines - the highest percentage of sales loss on a monthly basis since the bank started tracking that statistic in July 1995.

Shoppers, worried about growing unemployment, shunned discretionary purchases, hurting department stores and specialty shops that depend upon apparel sales. Sales fell 17 percent at Gap Inc., 18 percent at Abercrombie & Fitch and 13.9 percent at AnnTaylor Stores Corp.

The month helped to widen the gap between those types of retailers and discounters, who were the primary beneficiaries of consumers' propensity to buy necessities and to "buy down."

BJ's Wholesale Club Inc., for instance, saw sales rise 3.3 percent. Sales of food and consumables have been increasing as a percentage of overall sales, and that trend became even more pronounced in September. After Sept. 11, sales of major appliances and software weakened while sales of food and consumables rose.

"What we saw in September was that traditional department stores as well as all apparel-based retailers got killed; on the other hand, discount stores came through with good numbers," said Kurt Barnard, president of Barnard's Retail Trend Report, an industry newsletter. "Prior to Sept. 11, the American economy was in a sharp decline. Sept. 11 made a bad situation worse."

As it has for much of the year, Wal-Mart Stores posted strong same-store sales gains in both its Wal-Mart and Sam's Club warehouse stores - 6.7 percent and 4.6 percent respectively. Sales rose 4 percent at Kohl's Corp., the clothing and home-goods discounter, and at Ross Stores Inc., where same-store sales performed as expected.

TJX Cos. Inc., an off-price apparel and home-goods merchant, said sales rose 2 percent, as the chain aggressively marked down merchandise and lowered its regular prices. Even with a sales increase, the retailer lowered its third-quarter profit estimate to 54 cents per share, compared with 56 cents per share in the third quarter of last year.

Specialty and department stores suffered the steepest declines.

Gap Inc. saw sales plummet 17 percent, significantly missing the company's expectations because of weak sales at Gap and Old Navy stores. About half the sales shortfall came in the second week, after Sept 11.

"We do not see an improvement in comparable store sales in October from the negative 17 percent experienced to date," said Heidi Kunz, Gap's chief financial officer. "In addition, margins remain under considerable pressure as we continue to mark down remaining fall products in preparation for the holiday season."

The company said it expects a loss in the third quarter and said it had a "very cautious" outlook for the next few quarters.

Sales fell 18 percent at Abercrombie & Fitch and 13.9 percent at AnnTaylor Stores Corp., where business was hurt most in downtown and tourist areas. AnnTaylor, which lost a store that was scheduled to open in the World Trade Center in November, reduced its third-quarter net sales projections by about $38 million, which would mean earnings of 42 cents to 46 cents per share, compared with 78 cents per share in the third quarter of 2000.

Department stores fared little better than specialty shops, with sales down an average 6.3 percent, according to the Bank of Tokyo-Mitsubishi.

Saks Inc. said its sales declined 11.5 percent, with the company's Saks Fifth Avenue and Saks Off 5th stores hurt most because of their New York presence and the more serious effect on luxury goods. All categories at Saks Fifth Avenue stores came in below plan, with the weakest sales in jewelry, men's apparel and women's designer apparel.

Sales fell 12.9 percent at Federated Department Stores Inc. and 10.9 percent at The May Department Stores Co. May, the parent of Hecht's and Lord & Taylor, said consumer spending dropped sharply after Sept. 11 and, despite a recent pickup in traffic, announced that it would not meet earnings estimates for the third quarter.

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