Philadelphia Tribune - Index

Philadelphia Tribune - Sunday, September 07 2008 - Index

Page 6-A Sunday, September 7, 2008
Shoppers cling to their wallets, retailers suffer
A shopper leaves a
Target store with a
shopping cart of
items Thursday in
Irving, Texas.
Americans faced
with high gas and
food prices focused
even more on
necessities and
shunned clothing
purchases in July,
resulting in solid
gains for discounters
and sluggish
sales for mallbased
apparel
stores.
— AP PHOTO/TONY GUTIERREZ
Anne D’Innocenzio
NEW YORK — Many retailers
struggled with a sluggish backto-school
season, though Wal-
Mart posted higher August
sales Thursday as Americans
focused on buying essentials
amid worries about high gas
and food prices.
As merchants announced
their August sales results, Wal-
Mart Stores Inc., the world’s
largest retailer, reported a solid
gain that beat Wall Street forecasts.
But mall-based apparel
stores, like teen merchants Wet
Seal Inc. and Abercrombie &
Fitch Co., remained in the doldrums.
And high-end retailers
Saks Inc. and Nordstrom Inc.
posted weaker results as their
affluent customers start to feel
pinched.
“Consumers are spending on
necessities and looking for
value and the lowest price possible.
And it’s reflective again in
the results that we are seeing,”
said Ken Perkins, president of
research company
RetailMetrics LLC.
The International Council of
Shopping Centers-UBS sales
tally rose 1.7 percent in
August, below the 2 percent
forecast. Excluding Wal-Mart,
the results were unchanged
from a year ago. Last month’s
pace was below the 2.3 percent
average since the beginning of
the industry’s fiscal year in
February. The tally is based on
same-store sales, or sales at
stores opened at least a year,
and are a key indicator of a
retailer’s health.
A report from the Labor
Department offered more evidence
that the slowing economy
is taking its toll on jobs, a
bad sign for consumer spending.
The number of workers
seeking unemployment benefits
jumped unexpectedly last
week, reversing three weeks of
declines.
Such reports aren’t comforting
to the retail industry as it
prepares for the critical holiday
season. Many merchants had
entered the fall season with
inventories well below a year
ago, but that may have not
been enough as last month
proved to be even weaker than
planned. In some cases, stores
were hurt by having too little
clearance merchandise, cutting
into sales. That was the case
with TJX Co. and Bon-Ton
Stores Inc., according to their
reports.
One encouraging factor is
that Hurricane Gustav, which
hit the Gulf Coast on Monday,
wasn’t as bad as analysts
feared — and that sent oil
prices even lower. Gas prices
have fallen from more than $4
a gallon to a national average of
$3.678 on Wednesday, but
remain well above the year-ago
figure of $2.792 a gallon,
according to AAA and the Oil
Price Information Service.
Still, Michael P. Niemira,
chief economist at the ICSC,
thinks that gas prices have to
fall to $3 per gallon or below
before shoppers will increase
their spending. And even then,
Americans still face other economic
worries such as slowing
personal income, higher food
prices and a slumping housing
market.
“The fall in oil prices is a bit
of good news, but we need to
see more positive economic
news,” Niemira said. He added
that oil prices remain volatile.
In fact, retailers are now getting
ready for the next series of
tropical storms, which could
send oil prices back up.
Wal-Mart reported a solid 3
percent gain in same-store
sales, helped by sales of groceries
and back-to-school
products. Analysts surveyed by
Thomson Reuters had expected
a 1.6 percent increase.
Including fuel, the retailer’s
same-store sales rose 3.5 percent.
“The underlying business
performance for Wal-Mart U.S.
continued to show strength
and the improved relative performance
has resulted in market
share gains,” Eduardo
Castro-Wright, the president
and chief executive of Wal-
Mart’s U.S. stores, said in a
statement.
Rival Target Corp.’s samestore
sales fell 2.1 percent,
though better than the 2.6 percent
decline expected. The
cheap chic discounter hasn’t
fared as well as Wal-Mart in the
weak economy as Target heavily
emphasizes nonessentials
such as home furnishings and
trendy jeans.
Another bright spot is warehouse
clubs as shoppers buy
in bulk to save money. Costco
Wholesale Corp. posted a 9
percent same-store sales
increase, though below the 9.6
percent estimate. Excluding
the effect of higher gas prices,
Costco’s U.S. same-stores sales
rose 6 percent.
Among luxury department
stores, Saks recorded a 5.9
percent drop in same-store
sales, steeper than the 4.7 percent
decline that Wall Street
expected. Nordstrom’s 7.9 percent
drop was worse than the
7.1 percent decline expected.
On Wednesday, J.C. Penney
Co. announced that same-store
sales at its department store
business dropped 4.9 percent,
slightly better than the 6.3 percent
decline that analysts had
projected.
Gap Inc. recorded an 8 percent
drop, though it was less
steep than the 9.7 percent
decline forecast.
Limited Brands, the operator of
Victoria’s Secret and Bath &
Body Works, suffered a 7 percent
drop, mostly in line with the 6.9
percent decline estimated. — (AP)