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Retailers reporting mixed results for April

Consumers gave some of the nation’s retailers a little relief in April after months of dismal sales, gravitating toward discounters and wholesale clubs.
/ Source: The Associated Press

Consumers gave some of the nation’s retailers a little relief in April after months of dismal sales, gravitating toward discounters and wholesale clubs but generally still shying away from stores selling clothes and other non-necessities.

The sales reports issued Thursday were better than expected, but still pointed to a consumer contending with rising gas prices, sagging home values and worries about jobs. Wal-Mart Stores Inc. and Costco Wholesale Corp. were among the top performers last month, while most mall-based apparel stores struggled.

“Consumers are focusing on value and price points and stretching their dollars,” said Ken Perkins president of RetailMetrics LLC, a research company in Swampscott, Mass. “They are feeling the pinch on multiple fronts.”

“There’s too much going on,” in the economy, Perkins said. He and others expect shoppers to use the extra cash to pay down debt and catch up on utility and food bills.

According to a preliminary tally from Thomson Financial, 19 retailers beat estimates, while nine missed. The tally is based on same-store sales, or business at stores open at least a year; they are considered a key indicator of a retailer’s health.

Analysts said some retailers were forced to discount to bring business in. With the retailing first quarter having ended at the end of April, companies will start reporting their earnings next week, and any heavy markdowns will likely erode the profits of some companies.

Perkins estimates earnings for the industry will decline by 14.9 percent, compared to a projection in January of 5.3 percent profit growth. Still, earnings would be worse if retailers hadn’t been prudent about cutting costs and scaling back inventory, he said. In fact, Kohl’s Corp. actually raised its earning outlook on Thursday.

The retail industry expected a lift in April sales figures because of an extra shopping day last month compared to a year ago. That quirk depressed March sales, while inflating April figures; analysts are looking at retailers’ performance for the two months combined, expected to be weak overall.

A deteriorating economy, soaring food and gas prices, limited credit and slumping home prices continue to unnerve shoppers. The Conference Board said late last month that Americans are gloomier about the economy than just before the U.S. invasion of Iraq in March 2003.

In a statement Thursday, Eduardo Castro-Wright, Wal-Mart Stores U.S. president and CEO, said the “economy continues to get tougher” and that customers increasingly are unable to stretch their dollars to the next pay day.

“As money gets tighter for them toward the end of the month, sales drop more than we have seen in the past,” he said.

Wal-Mart, which is rolling out more discounts, reported a 3.2 percent gain in same-store sales. Analysts polled by Thomson Financial expected a 2.1 percent gain. Including fuel, same-store sales climbed 3.8 percent.

The world’s largest retailer said business was helped by strong sales in grocery and health items as well as entertainment products like flat-panel TVs, video games and game consoles. The company said apparel sales continued to recover, despite cold weather, but home furnishings sales were weak.

Rival Target Corp. posted a 3.1 percent gain in same-store sales, below the 4.5 percent estimate, as consumers shopped for necessities such as food and skipped higher-priced items such as jewelry.

Costco reported an 8 percent increase in same-store sales, surpassing the 6.1 percent estimate.

Among department stores, Penney reported a 1.7 percent decline in same-store sales, though that was better than the 4.6 percent decline analysts expected. The top-performing merchandising areas in April were apparel and family footwear, while fine jewelry and home categories continued to experience weaker sales.

Nordstrom Inc. posted a 3.8 percent drop in same-store sales, worse than the 1.8 percent analysts expected.

Limited Brands reported a 5 percent drop in same-store sales, worse than the 2.3 percent analysts forecast.

Gap Inc suffered a 6 percent drop in same-store sales, worse than the 1.9 percent analysts anticipated.

Teen apparel chains had solid results, however; they often outperform other apparel retailers because teens are not forced to choose between necessities and their wardrobes.

Abercombie & Fitch Co. reported a 6 percent gain in same-store sales, surpassing the 2.3 percent estimate. Aeropostale Inc., whose clothing is about 30 percent cheaper than competitors like Abercrombie & Fitch, reported a 25 percent increase in same-store sales for the month. The figure surpassed the 7.1 percent estimate.

Pacific Sunwear of California Inc. posted a 4 percent increase in same-store sales, below the 5.6 percent estimate.