Department stores struggled in September, with many blaming Hurricane Katrina and higher gasoline prices for slowing sales.
Federated Department Stores Inc., owner of Macy's, disclosed that business conditions at its May Department Store Co. unit, which includes Hecht's and Marshall Field's, have deteriorated in recent months and could worsen.
Lackluster September results for department stores, however, were in stark contrast to other U.S. merchants. Most discount chains surpassed expectations, for instance.
Nearly two-thirds of publicly traded retailers beat Wall Street's forecasts for September, according to research firm Retail Metrics, which tracks results at 62 companies. Still, several companies warned that third-quarter financial results could come under pressure.
"Common threads were higher gas prices, warmer-than-expected temperatures stymieing fall apparel sales, and the impact, both real and psychological, from hurricanes," said Retail Metrics President Ken Perkins.
September chain-store sales posted a "moderate" 4 percent increase compared with the same month last year, according to the International Council of Shopping Centers. It expected a rise of more than 3 percent.
Sales at Wal-Mart Stores Inc., which in the past has blamed the impact of high gas prices for the decline in the spending power of its low-income consumers, rose 3.8 percent, near the high end of its forecast.
Target Corp.'s sales increased a higher-than-expected 5.6 percent.
"These stores got a boost from pre-hurricane sales of basic necessity items, and I also think they got a lift from post-hurricane sales," Perkins said.
But there's also evidence that more middle-income shoppers are feeling pinched, with some retail observers speculating that some retailers could lose business to discounters like Wal-Mart if gas prices remain high and if winter heating bills are as grim as expected.
Department stores that came in below analysts' estimates included Kohl's, J.C. Penney Co. and Nordstrom. Saks Inc. enjoyed a rise in sales at its mid-market department stores, which include Carson Pirie Scott.
Sales at Federated stores open at least a year rose 1.3 percent, exceeding analysts' estimates but below the company's.
"We had expected September comp store sales at Macy's and Bloomingdale's to increase between 2 and 3 percent, but a number of factors have led to disappointing sales results," Terry Lundgren, Federated chief executive officer, said, referring to comparable store sales, or same-store sales, which are regarded as the best indicator of a retailer's economic health.
"These include lost sales from stores closed because of hurricanes Katrina and Rita, reduced consumer spending resulting from higher gas prices, dampened consumer confidence and continued softness in our home store business."
The results of May's chains aren't included in Federated's numbers because the merger was completed in August.
But Federated also gave insights into May's performance.
The May chain's comparable-store sales, including Field's but excluding the bridal business it's planning to sell, are expected to be down 5 percent to 7 percent both in the September-October period as well as the fourth quarter.
In a conference call yesterday, Federated Chief Financial Officer Karen Hoguet warned that there were so many moving parts to the company in light of the May deal and other factors that it was difficult to make predictions. She said, however, that Federated has found no unpleasant surprises at May.
In response to an analyst question, Hoguet said May is in worse shape now than it was when Federated announced its intention to buy the company earlier this year.
"To some degree, we're starting at a lower base," she said. "But we see so much opportunity that we're not really concerned."
Becky Yerak writes for the Chicago Tribune.