By  on October 12, 2007

Shoppers gave stores the cold shoulder in September and the chill might extend into the holiday season.

Unseasonably warm temperatures and a difficult year-over-year sales comparison took a toll on September same-store sales. Merchants had a product mix oriented toward cool weather apparel, now they are faced with overstocks of fall merchandise and will have to clear out that product with markdowns to make room for holiday. Those clearance sales will eat away at gross margins and the bottom line.

Jump to September Same-Store-Sales Chart

The mass merchant channel delivered the strongest results among companies tracked by WWD, with a sector average of a 0.4 percent gain. Department stores showed an average decline of 1.7 percent and specialty chains were down 2.3 percent.

Nordstrom Inc., Target Corp., Kohl's Corp., J.C. Penney Co. Inc., American Eagle Outfitters Inc., Limited Brands Inc., Stein Mart Inc., The Cato Corp. and Children's Place Retail Stores Inc. all warned that third-quarter earnings could be lower than expected as a result of soft results in September.

Nordstrom lowered third-quarter earnings predictions to 50 to 53 cents a share from prior estimates of 61 to 64 cents. American Eagle revised earnings guidance to 44 to 45 cents a share versus previous guidance of 47 to 48 cents. J.C. Penney now expects earnings per share between $1 and $1.04 versus previous estimates of $1.28 per share.

In contrast, Wal-Mart Stores Inc. raised its forecast based on lowered costs.

"We've been talking all along about a softer 2007 from a retail standpoint across all businesses," said Kevin Regan, retail specialist and senior managing director, FTI Consulting. "I don't see a change in that. I see a continuation in performance in the specialty and department stores that is below last year."

Despite the housing slump, high fuel costs and tighter credit, Regan said consumers remain resilient. Personal spending decisions are based less on the economy at large and more on personal circumstances. Those circumstances, however, could also include higher mortgage payments (foreclosure filings doubled in September), rising credit card fees, and higher food and commodity prices. The big question is whether shoppers will seek "retail therapy" this holiday.

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