Sales at U.S. retailers tumbled in November, the worst monthly performance in almost four decades, after the Wall Street meltdown caused consumers to postpone shopping until the Black Friday holiday-sales kickoff.
J.C. Penney Co., Nordstrom Inc. and Gap Inc. all reported sales drops of 10 percent or more at stores open at least a year. The decreases were less than some analysts estimated after 50 percent-off discounts on clothing lured customers grappling with the U.S. recession. Wal-Mart Stores Inc. posted a 3.4 percent gain.
Declines in consumer spending in October persisted into the first part of November before rebounding on Black Friday, the unofficial start to the holiday-shopping season. Macy’s Inc. lowered prices by half on some coats, while Gap offered sweaters in a two-for-one promotion. The markdowns may hurt retailers during a period when they make a third or more of their annual profit.
“The promotions are pretty much across the board in retail, and some are the biggest you’ve seen in years, especially at the high end,” said David Abella, a portfolio manager at Rochdale Investment Management LLC in New York, with $2 billion in assets including Wal-Mart shares. “They will need to keep that up through December to draw traffic and sales, and that may erode margins.”
November same-store sales fell 2.7 percent, the International Council of Shopping Centers said, based on a survey of 37 chains. That’s the worst since the ICSC began tracking data in 1969. The New York-based ICSC said purchases during the final two months of the year may fall as much as 1 percent, worse than its forecast of a 1 percent gain.
Wal-Mart Gain
The comparable-store sales gain by Wal-Mart beat the world’s largest retailer’s forecast for a 1 percent to 3 percent increase. Limited Brands Inc., the owner of the Victoria’s Secret chain, dropped 12 percent, while Costco Wholesale Corp.’s global sales declined 5 percent.
Wal-Mart climbed $1.21, or 2.2 percent, to $55.59 at 11:07 a.m. in New York Stock Exchange composite trading. Nordstrom rose 14 percent, while Gap increased 5.5 percent.
“The news out of Costco and Wal-Mart wasn’t really that bad,” Jessica Hoversen, a foreign-exchange and fixed-income analyst at MF Global Inc. in Chicago, said in a Bloomberg Television interview. “That’s definitely a positive, and Black Friday sales weren’t as bad as everyone thought they would be.”
The 27-company Standard & Poor’s 500 Retailing Index declined 36 percent this year through yesterday, with only discount retailers Family Dollar Stores Inc. and Big Lots Inc. posting gains. Wal-Mart, which isn’t an index component, has advanced 14 percent.
Retail Metrics
Retail Metrics Inc. said November same-store sales fell 1.8 percent, the worst monthly figure since the research group starting tracking results in 2000. Excluding Wal-Mart, sales plummeted 7.3 percent, the firm said.
The later Thanksgiving holiday in 2008 compared with last year, resulting in five fewer shopping days before Christmas, may push more sales into December, according to Retail Metrics.
Total sales at U.S. retailers rose less than 1 percent during the three days after Thanksgiving compared with a year earlier, ShopperTrak RCT Corp. said. A 0.8 percent decline on Nov. 29 further damped the smallest gain in three years on the day after the holiday, called Black Friday because retailers were said to turn a profit for the year because of increased sales.
“Consumers were bargain-hunting and therefore if you had better bargains, you had more customers,” Amy Wilcox Noblin, a retail analyst at Pali Capital Inc. in Larkspur, California, said in a Dec. 2 interview.
U.S. Recession
The National Bureau of Economic Research said earlier this week that the U.S. economy entered a recession in December 2007. The jobless rate probably increased to 6.8 percent last month, the highest level since 1993, the median estimate in a Bloomberg News survey showed.
Wal-Mart’s increase beat the average analyst estimate of 2 percent, according to Swampscott, Massachusetts-based Retail Metrics.
Costco, the largest U.S. warehouse-club chain, trailed projections of a 1.3 percent drop. Comparable-store sales are considered by some investors to be the best measure of retail health because they exclude the effect of location openings and closings in the past year.
Gap, the largest U.S. apparel retailer, posted a 10 percent comparable-store sales decline, exceeding analysts’ estimates for a 17.6 percent drop. The owner of the Banana Republic and Old Navy chains said it had “more aggressive offers” to attract customers, hurting profit margins.
28 Percent
Abercrombie & Fitch Co.’s same-store sales plunged 28 percent. The teen apparel retailer, known for its shirtless male models, said last month it won’t use promotions to lure shoppers to protect its brand image. Analysts projected a 26 percent drop.
American Eagle Outfitters Inc. posted an 11 percent decline as the retailer discounted clothes. Fourth-quarter profit will be 30 cents to 36 cents a share, it said. Analysts surveyed by Bloomberg estimated an average of 39 cents.
Sears Holding Corp., the largest U.S. department-store chain, said Dec. 2 that November comparable-store sales declined 8.7 percent. Macy’s, the second-biggest, said today that same-store sales fell 13 percent.
J.C. Penney’s sales dropped 12 percent, within its forecast and better than analysts predicted. Kohl’s Corp. dropped 18 percent. Target Corp., the second-largest U.S. discount retailer, lost 10 percent, worse than it had forecast.
‘Cautious’ Consumers
“Results from post-Thanksgiving holiday sales, particularly Friday, were stronger than the rest of the month, but were insufficient to offset earlier weakness,” Target Chief Executive Officer Gregg Steinhafel said in a statement. “Consumers remain very cautious and event-driven in their purchasing behavior.”
Neiman Marcus Group Inc. sales fell 12 percent, while Saks had a 5.2 percent drop, better than the 20 percent fall estimated by analysts. Nordstrom Inc. sales retreated 16 percent. Analysts projected a deceleration of 19 percent.
Victoria’s Secret Chief Executive Officer Sharen Jester Turney said in a Dec. 2 interview that the retailer was a little more promotional on Black Friday this year than in the past. The company may take additional steps, marking down some beauty gift sets 40 percent, for example, she said.
“The remaining three weeks are incredibly important,” Bill Dreher, director and senior retail analyst at Deutsche Bank Securities Inc. in New York, said in a Dec. 2 interview. “The last week before Christmas is perhaps more important than it’s been in years. Will it pay off? It’s unlikely.”
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