March retail sales decline

Department stores, discount chains are losers

Wal-Mart has a tiny gain

Winners are Gap Inc., Abercrombie's Hollister

April 11, 2003|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Sales at the nation's leading stores proved disappointing in March for discount outlets as well as more upscale chains, as shoppers worried about the war and the weakened economy continued putting a crimp in consumer spending.

Retailers also blamed lower sales on cool spring weather in much of the nation, which hurt apparel sales, and on a shift in the Easter holiday, which came in March last year and falls in April this year, and which typically helps boost buying.

Retail sales dipped an average 0.2 percent, according to the Bank of Tokyo-Mitsubishi, which tracks sales at stores open at least a year for 79 chain retailers.

"All segments of the industry were affected by weather, war, a weak economy and tough comparisons with March 2002," said Michael P. Niemira, a vice president at Bank of Tokyo-Mitsubishi.

He and other analysts said it was tough to compare last month's sales with those from March 2002 because Easter falls three weeks later, on April 20, vs. March 31 last year.

"But then the question is if you adjusted for some of these special factors such as shifts in Easter, is it that much stronger?" Niemira said. "It would still be a relatively weak underlying trend."

Many retailers said sales were lower than expected.

Target Corp., the nation's second-biggest discount chain, reported a drop of 2.3 percent in sales and said it would be unlikely to make its profit goal for the first quarter.

Sales at the Target stores division fared better than at the company's department stores, however, dipping 1.3 percent, while sales fell as much as 8 percent at its department stores.

Barnes & Noble Inc., the nation's largest bookseller, lowered its earnings forecast for the first quarter by 7 cents per share, after March sales fell 8.4 percent. And at the TJX Cos. Inc. sales were slightly below expectations as well, dipping 2 percent, the company said.

Same-store sales slid 11.4 percent at the May Department Stores Co., which runs Hecht's and Lord & Taylor; 6.5 percent at Federated Department Stores Inc., which runs Macy's and Bloomingdale's; 3.8 percent at Saks Inc.; 3.1 percent at Sears, Roebuck and Co., and 5.5 percent at J.C. Penney Co. Inc.

Wal-Mart up 0.3%

Even industry leader Wal-Mart Stores Inc. has not been immune, reporting only a slight sales increase of 0.3 percent in March.

One retail expert said slow sales in most segments of retail had more to do with the weakened economy than the war.

"A lot of people will tell you that it's all because of the war in Iraq, and now that the war is coming close to an end, consumers will start shelling out money like crazy," said Kurt Barnard, president and chief economist at Barnard's Retail Consulting Group in Upper Montclair, N.J. "It ain't going to happen."

Consumers, he said, are jittery about the possibility of layoffs and the lack of jobs and running low on confidence.

"Companies in America are not hiring; instead they are letting people go," Barnard said. "None of this adds up to inspire people to go out on buying binges."

While the war has been a factor, a more significant one has been what analyst Jennifer Black calls the "FUD effect," or fear, uncertainty and doubt.

"In a time of uncertainty, customers are going to buy basics," said Black, an executive vice president and senior research analyst at Wells Fargo Securities.

"Companies that offer basics and excellent quality at great values" have benefited.

Gap gains 9%

Such factors, she said, have helped several retailers stand out with positive sales numbers, such as Old Navy, a division of Gap Inc., which reported a 9 percent increase.

Abercrombie & Fitch has positioned itself well with its Hollister Co. stores, where sales rose by double digits and which feature a clean, surf-inspired apparel.

"That clean inspiration is so right-on," Black said.

Sales were also up at Kohl's Corp. by 0.4 percent.

Niemira said he expects overall improved results for April.

"The flip of the Easter shift will push up the numbers," said Niemira, who is projecting sales will be up an average 2.5 percent to 3.5 percent in April, compared with April 2002.

Lower gasoline prices could help, as could stabilized labor markets.

But "the negatives are the continuing story, which is weakness in the broader economy that's impacting consumer spending and tastes," he said.

Monthly retail sales

.................................... Monthly ...... Monthly ........... YTD ............... YTD

...................................... sales* ....... same-store .... sales* ...... same-store

Company ................................... pct. change ......................... pct. change

Federated ............... $1,233.0 .......... -6.5 ............ $2,216.0 ................... -6.7

The Gap ................... $1,400.0 .........+9.0 ............ $2,200.0 ................. +9.0

J.C. Penney .............. $1,171.0 ......... -5.5 ............ $2,077.0 ................... -4.0

Jos. A. Bank .................. $23.9 ........+2.4 ............ $39.3 ........................+0.7

Kohl's Corp. ................. $913.5 .......+0.4 ............ $1,399.7 ................... -1.5

The Limited .................. $690.1 ....... -4.0 ............ $1,262.0 ................... -3.0

May Dept. Stores ...... $1,059.2 ..... -11.4 ............ $1,905.2 ................. -10.3

Men's Wearhouse ......... $116.8 ....... -3.0 ............ $203.8 ...................... -1.5

Nordstrom ..................... $518.0 ....... -1.7 ............ $885.7 ...................... -1.9

Sears ............................ $2,399.9 ........ -3.1 ............ $4,149.8 ................... -5.9

Target Corp. .............. $3,889.0 ......... -2.3 ............ $6,815.0 ................... -1.9

Wal-Mart ................... $14,951.0 ....... +0.3 ............ $27,123.0 ................+1.3

*In millions

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