NEW YORK — Uncommon weakness at its discount stores kept Target Corp.’s sales gains last week below their projected level for the month.
Minneapolis-based Target said that, for the month, the Target division expects a comp rise of 3 to 5 percent. Due to slower growth rates and the smaller size of the firm’s Marshall Field’s and Mervyn’s divisions, total corporate comps for the month should sag the firm’s bread-and-butter division by 1 to 1.5 percent.
Strongest merchandise categories for the week included pharmacy, entertainment, domestic and toys. Garden, electronics and jewelry were among the weaker categories. Regionally, the Mid-Atlantic and Northeast regions continued to outperform the rest of the country.
Like those of other retailers, shares of Target took a beating Tuesday, falling $1.82, or 5 percent, to end the day at $34.62.
Target’s same-store sales last month came in ahead of plan with a 4.9 percent increase, thanks to a 6.1 percent uptick at its discount stores. Declines at Marshall Field’s and Mervyn’s totaled 2 and 0.1 percent, respectively.
While trending below its own projections for at least the start of the month, Target still has loftier goals than many retailers. However, Wal-Mart Stores, an exception to many retail rules, said strong growth in women’s and girls’ apparel helped same-store sales last week trend toward its July forecast of a 5 to 7 percent advance. Recently, the discount giant raised second-quarter earnings estimates by a single cent, to 44 to 45 cents a share.
While discounters have in the recent past been held to a higher sales standard, other key broadline retailers with lower same-store sales projections met their plans for last week.
Federated Department Stores, which finished June with a 0.4 percent same-store decline, said Monday that it expects its July same-store sales will be flat to down slightly from year-ago results. J.C. Penney Co. said comps were tracking on plan for a department store comp decline of 2 to 4 percent for the month as a whole. Sears, Roebuck & Co. said sales through the first week of July were in line with its plan for a low-single-digit same-store decline for the month.Broadline retailers showing declines in their stock prices Tuesday included: Wal-Mart, down $3.56, or 6.7 percent, to $49.88; Sears, $2.25, or 4.8 percent, to $44.75; Penney’s, 64 cents, or 3.5 percent, to $17.42; Kohl’s, $2.21, or 3.3 percent, to $65.24; May Co., 95 cents, or 3.2 percent, to $29.23; Federated, 59 cents, or 1.6 percent, to $35.46.
Specialty retailers also getting a sinking feeling about their shares were: Pacific Sunwear, down $1.57, or 7.2 percent, to $20.40; Gap, 94 cents, or 6.9 percent, to $12.78; Christopher & Banks, $2.39, or 6.5 percent, to $34.51; Chico’s FAS, $2.11, or 6.3 percent, to $31.39; Bebe, $1.03, or 5.5 percent, to $17.65, and The Limited, 89 cents, or 4.9 percent, to $17.45.
While the sluggish economy has favored value over style, Target and Wal-Mart also face less competition frombankrupt Kmart, which last year was pushing to become more of a player on the low-price scene.
A recent A.G. Edwards survey compared the average-item prices at Wal-Mart, Target and Kmart stores in the St. Louis area, within a 10-minute drive of each other, and found the latter is much less competitive this year, as Target continues to breathe down Wal-Mart’s neck.
While similar surveys conducted between January 2000 and June 2001 by the investment firm found Kmart’s prices to be 8 to 15 percent higher than Wal-Mart’s, the study showed Kmart’s retail prices are now an average of 19 percent above Wal-Mart’s. Likewise, while Kmart had been within 5 to 8 percent of Target, the difference between prices at the two retailers has grown to 15 percent. In the latest survey, Kmart proved to be the least competitively priced in convenience foods, where its prices on average were 36 percent higher than Wal-Mart’s and 27 percent above Target’s.
Analyst Robert Buchanan noted that the survey "showed Target to remain competitively priced with Wal-Mart — especially so when one adjusts for higher incomes [and the] generally lesser degree of pricing sensitivity of Target’s customers." On average, Target’s prices on the 198 items across seven merchandise categories covered in the survey were 4 percent higher than Wal-Mart’s."
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