Reports signal economy still in rough patch

Retailers have weak Aug. amid back-to-school sales

Gas cost, storms deter shoppers

Fears that less spending will undercut recovery

September 03, 2004|By Becky Yerak | Becky Yerak,CHICAGO TRIBUNE

Several retailers missed the first bus for the back-to-school shopping season, posting weak August numbers as everything from higher gasoline prices to Hurricane Charley prompted consumers to stay away.

Even brawny Wal-Mart Stores Inc. registered its most lackluster numbers in more than three years. The world's biggest retailer, which already had toned down expectations for August, squeezed out a 0.5 percent rise in sales in stores open at least a year. Analysts polled by Thomson First Call expected a 1.5 percent increase.

Sears, Roebuck and Co. posted a 6.1 percent drop in same-store sales - more than twice as bad as analysts expected in a survey by Retail Metrics. It was the worst monthly showing for the company in 2004. Only Sears' Great Indoors home-improvement chain saw an upturn.

The back-to-school months of August and September are the year's second-busiest shopping season.

The International Council of Shopping Centers-UBS sales tally of 71 retailers was up a meager 1.1 percent, missing its already reduced forecast for a 1.5 percent to 2 percent gain. That's the weakest performance since March 2003, when merchants reported a 0.2 percent decline. The tally is based on what the industry calls same-store sales, or sales at stores opened at least a year.

The discouraging news came from nearly all retail sectors and raised concerns that consumers who have helped prop up the economy with spending might now be contributing to its slowing.

The big exceptions were high-end stores whose customers were the first to benefit from the economic recovery and who haven't been as vulnerable to rising prices for gasoline.

Best Buy Co. Inc. offered a solid sales outlook based on strong business from its digital TVs and such services as its 24-hour computer support.

When 2004 is over, the industry will find that growth in same-store sales will pale in comparison to that in 2003, predicted Richard Hastings, analyst for Bernard Sands. "There'll still be growth year over year, but it will be 1 1/2 percentage points less growth," he said. "Instead of 5.5 to 6 percent growth, you'll see something more like 4.5 percent to 4 percent."

Furthermore, the weak August will pressure merchants to make up for lost business.

"It will be an uphill battle," said John Morris, senior retail analyst at Harris Nesbitt. "The consumer senses uncertainty [with] security concerns, the presidential election and gas prices."

Jay McIntosh, director of retail for the Americas for Ernst & Young, said he expects retail sales in the second half of 2004 to rise 4 percent to 5 percent. That's about half of the 10 percent increase in the first half.

"It's gas prices and the economy in general," McIntosh said.

Hurricane Charley, which hit Florida last month and forced store closings, also affected August results. Its fallout continues. Shoppers near the storm's path might not be open to discretionary spending. Also yesterday, parts of Florida were evacuated to avoid Hurricane Frances.

Also dampening August results were a late Labor Day weekend, thereby pushing sales into September. Additionally, there were no one-time child care tax credits for consumers to spend.

"We anticipated August would be a tough comparison from 2003, partly because of the absence of tax refunds this year and the strong performance of our appliance and lawn and garden businesses last year," said Sears Chairman Alan Lacy.

"While we experienced softer-than-expected back-to-school sales, we look forward to the fall and holiday seasons as our teams improve the customer experience and enhance our merchandise offerings."

For the year to date, Sears' sales are down 2.4 percent. Costco Wholesale Corp., Limited Brands, May Department Stores, J.C. Penney Co. and Federated Department Stores all did worse than expected.

Costco Wholesale Corp. reported a 4 percent gain in same-store sales, missing Wall Street's 7.3 percent forecast.

Limited Brands suffered a 2 percent drop in same-store sales, worse than the 0.3 percent projected decline.

Surpassing expectations were upscale Nordstrom Inc. and Neiman Marcus Group. But some middle-brow retailers - Target Corp., Talbots, Gap Inc., American Eagle Outfitters Inc. and Abercrombie & Fitch - also did better than expected.

Gap Inc. had a 1 percent drop in same-store sales, better than the 2.7 percent decline forecast by Wall Street.

Among teen retailers, American Eagle Outfitters continued its strong sales streak, announcing Wednesday a 23.9 percent increase in same-store sales. That was well above the 13.9 percent increase that analysts expected.

Abercrombie & Fitch recorded a 5 percent decline in same-store sales, though it was better than the 6.5 percent decrease Wall Street forecast.

The Associated Press contributed to this article. The Chicago Tribune is a Tribune Publishing newspaper.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.