September retail sales rose a `weak' 1.5%

Major chains post weakest gain of year

October 11, 2002|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

As stocks plunged, the job market weakened and the prospect of war with Iraq loomed, American consumers tightened spending in the nation's stores last month.

Many of the biggest U.S. retailers reported disappointing sales yesterday - the slowest average sales gain in a year - as shoppers largely bypassed sweaters and outerwear and back-to-school items.

Sales increased an average of 1.5 percent, according to the Bank of Tokyo-Mitsubishi Ltd.'s tally of 79 major retail chains.

"The performance was surprisingly weak, given the easy comparison with September of last year," when sales rose 0.9 percent after the Sept. 11 terror attacks, said Michael P. Niemira, a vice president of Bank of Tokyo-Mitsubishi. "It was pretty weak across the board."

Department and specialty stores felt the brunt of consumers' belt-tightening. Sales fell 6.2 percent at May Department Stores Co. and 3.1 percent - more than expected - at J.C. Penney Co. Sales were off 2 percent at Gap Inc.

Sales at Federated Department Stores Inc. were flat, prompting the company to lower sales and earnings estimates for this month and for the third and fourth quarters.

"These revised forecasts more accurately reflect the difficult economic and international climate we currently are facing," said James M. Zimmerman, Federated's chairman and chief executive officer.

Sales also were weaker than expected at stores that compete on price and have been more immune to economic conditions.

Sales inched up 3.3 percent at Wal-Mart Stores Inc. and dipped 3.2 percent at Kohl's Corp. Sales also fell below expectations at Target Corp., decreasing 0.8 percent compared with sales in September last year and leading the retailer to lower sales and earnings expectations for the near term.

Niemira blamed concern over the economy.

"The problem is, of course, none of these factors on the economic front have changed, so it doesn't bode well going forward," he said.

Shoppers' reluctance to buy can also be attributed to merchandising gaffes and uninspiring offerings at many stores, a problem that chain stores and department stores have struggled with and that might be starting to affect lower-priced mass merchants, one analyst said.

"Retailers have hurt themselves with the same, uninspiring products in the stores this season that have caused people to say they don't need to buy apparel," said Russell Jones, vice president of retail consulting for Cap Gemini Ernst & Young in Vienna, Va. "It's not that [shoppers] don't have money to spend; it's that they don't see a reason to spend it.

"It's more about where's the right place to spend and whether they're being inspired to spend."

With many consumers taking advantage of low mortgage rates to refinance their homes, Jones said, "consumers are putting their money back where they got it, into home-related purchases."

That was the case at Sears, Roebuck and Co., where shoppers bought tools and home appliances in abundance but often left other merchandise sitting on the shelves, resulting in a 5.9 percent drop in sales.

Upscale retailer Saks Inc., which runs Saks Fifth Avenue stores and a group of department stores, reported a 3.3 percent sales increase. Categories with the best performance included decorative home and furniture. Sales were slower in outerwear, men's sportswear and junior apparel.

Besides an uncertain economic climate, Sears blamed its poor performance on disruption from store renovations. The company said it expects the resulting improvements in merchandising and customer service to give its holiday season a boost.

At AnnTaylor Stores Corp., sales rose 2.3 percent, less than expected, as strong sales of suits and dresses were offset by weak sales of sweaters and separates, the company said. The chain said it still managed to improve gross margins because of strong sales of apparel at full price and tight inventory levels.

Retail chains that did better than expected included Limited Brands, with a 6 percent increase, driven by strong sales at its Victoria's Secret Stores. Sales increased 18.7 percent at Neiman Marcus Group Inc., parent of Neiman Marcus Stores and Bergdorf Goodman.

Analysts said Limited has been successful in keeping its brands - among them The Limited, Limited Express, and Victoria's Secret - separate and distinctive, giving consumers reasons to shop across brands.

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