US retailers see glimmers of demand

US retailers see glimmers of demand
By Jonathan Birchall in New York
Copyright The Financial Times Limited 2009
Published: April 9 2009 16:23 | Last updated: April 9 2009 16:23
http://www.ft.com/cms/s/0/18ef167a-2517-11de-8a66-00144feabdc0.html


March sales figures from leading US retailers provided some shimmers of light amid the prevailing gloom, with a number of store chains reporting signs of an increased readiness to spend by still-cautious consumers.

The months comparable sales figures were affected by the shift in the timing of Easter, which drives gift and clothing sales, from March to April this year. The monthly data from store chains can also reflect specific marketing and merchandising, rather than broader economic trends.

But the March sales data offered some signs that middle-class shoppers, who snapped their wallets shut in the fourth quarter of last year, may be starting to resume cautious spending.

JC Penney, the US department store focused on middle class consumers, said it had seen “a positive response” in women’s clothing and in its home business” as it reported a better-than-expected 7.6 per cent fall in sales at stores open at least a year. The retailer had forecast a low-double digit to mid-teen drop.

The retailer raised its forecast for first quarter earnings, which will include a 23 cent pension costs non-cash charge, seeing a loss of 5 to 10 cents against a previous estimate of a 20 to 30 cent loss.

Its rival Kohls reported a 4.3 per cent fall in same store sales. Kevin Mansell, chief executive, said the results “exceeded our expectations” and that home furnishing sales had also been its strongest business.

Target, the discounter that is also heavily dependent on clothing and home sales, said it had “begun to see encouraging signs” in the operating results of both its stores and its credit card business. The retailer reported a 6 per cent drop in comparable March sales, but said it expected April sales to be essentially flat, due to the Easter shift.

Wal-Mart, the largest US retailer, reported that comparable sales at its Supercenters and discount stores increased just 0.6 per cent, below Wall Street’s expectations. Including its Sam’s Club warehouses, which saw a 6 per cent increase, the retailer’s overall US same store sales rose by 1.4 per cent.

But it said it expected its first quarter earnings to come in at the higher end of the 72 to 77 cents per share it forecast in February.

Wal-Mart also reported the sixth consecutive month of increases in customer traffic. It said average transactions were lower, which it attributed to the Easter shift, and to moderating price rises in its grocery sales.

The retailer said sales were again driven by grocery and pharmacy sales, but said that its home and “do-it-yourself” categories had seen mid-single digit comparable store sales gains.

Luxury retailers continued to struggle during the month, with Neiman Marcus and Saks reporting comparables sales falls of 29.9 per cent and 23.6 per cent. Both reported weakness across all their merchandise categories.

Elsewhere, Gap reported an 8 per cent fall in comparable sales, but said it had stopped the sales decline during the month at its troubled Old Navy division. Gap brand US sales were down 14 per cent, and Banana Republic fell 16 per cent. But the retailer said it had achieved profit margins above those seen last year.

Despite the outbreaks of optimism, overall March sales fell by more than Wall Street expected. Retail Metrics, which tracks the monthly figures, said its index fell 1.6 per cent, against the 0.6 per cent fall it had been expecting. But it also noted that several retailers including Hot Topic, American Eagle and Cache, the fashion retailers, as well as “off price” discounters TJX and Ross Stores had raised first quarter earnings guidance.