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Retail sales sluggish
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November 2, 2000: 12:56 p.m. ET
October may indicate weaker holiday season; Penney warns of wider 3Q loss
By Staff Writer Chris Isidore
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NEW YORK (CNNfn) - Major retailers reported generally sluggish October sales Thursday, with J.C. Penney Co. warning of a bigger-than-expected loss in its fiscal third quarter, as analysts said the reports suggest a slowdown in consumer spending and possibly a modest holiday shopping season ahead.
Even when major chains posted gains in sales, those gains were below year-ago levels. And some of the leading retailers, particularly those that already were going through difficulties, saw drops in key sales measures.
"The sales clear evidence of modest consumer spending slow down," said Kurt Barnard, president of Barnard's Retail Trend Report. "We expect a decent holiday sales season, but an unspectacular one. The last three have been spectacular, particularly the last one."
J.C. Penney said a drop in sales would result in a larger-than-expected loss for the just-completed quarter. And No. 3 retailer Kmart Corp. also saw disappointing results as it struggled to close stores and dump inventories. Both companies have replaced leadership this year.
Penney, the nation's No. 5 retailer, said overall sales fell 1.7 percent to $2.5 billion. Sales at its department stores open at least a year, a closely watched measure known as same-store sales, fell 2.6 percent, while same-store sales at its drug store segment gained 8.4 percent.
 The Plano, Texas-based company said it now expects to lose 10 to 15 cents a share in the third quarter, far more than the 5 cent a share loss forecast by First Call.
The lowered guidance follows a similar warning late Wednesday from Gap Inc. (GPS: Research, Estimates), a leading clothing retailer.
The picture wasn't much better for Kmart, which has been closing stores and posting disappointing results.
The Troy, Mich.-based chain's sales were essentially unchanged at $2.5 billion in the period, while same-store sales fell 1.2 percent. But that decline was muted by liquidation sales at some stores that were closing. Excluding those sales, same-store sales fell 2 percent in the period.
"Kmart is in a condition of repair right now," Barnard said. "It is almost surprising they are down only 2 percent. They have a huge amount of over-age inventory they have to unload."
Overall industry sales for the month were well behind those of competitors, despite signs of a slowing economy. Total same-store sales gained 2.7 nationwide in October, according to Telecheck Services Inc., which clears check purchases for major retailers. A year earlier, the service reported a 3.7 percent gain in same-store sales.
"Consumers have been on a shopping frenzy for so long, they may be trying now to 'pace themselves' in preparation for the upcoming holiday shopping season," Telecheck's senior economic advisor William Ford said.
Ford and Barnard both said they expect to see overall gains in same-store sales in the holiday season, but those gains will be well below year-ago levels, and perhaps less than expected by some analysts and investors.
Wal-Mart gains slow
Wal-Mart Stores Inc., the world's largest retailer, said it expects sales at its stores open at least a year to rise 3 to 5 percent in both November and the fourth quarter, which runs through January, if current sluggish sales trends persist.
"Although sales are less than we would like, we continue to believe that we are gaining market share in this economy," the Bentonville, Ark.-based chain said in a recorded message for investors.
October sales at Wal-Mart Stores grew, but at a slower pace than in earlier periods. The company said apparel sales were weaker than expected.
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"We expect a decent holiday sales season, but an unspectacular one."
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Kurt Barnard
President, Barnard Retail Trend Report |
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Its overall sales increased 10.1 percent to $14.3 billion in the four weeks ended Oct. 27. That's a slowdown from the 18.6 percent growth rate in the first 39 weeks of the year.
Same-store sales gained 4.9 percent during the four weeks, down from a 6.2 percent gain in the year-ago period.
Sears shows broad gains
No. 2 retailer Sears Roebuck & Co. said overall sales rose 4.0 percent for the four weeks to $3.1 billion, while domestic same-store sales gained 3.0 percent. The company said gains in sporting goods, appliances, electronics and apparel sales led the way.
Target Corp., which operates the Target and Mervyn's chains, posted sales that beat the company's internal plans. Overall sales rose 9.1 percent to $2.6 billion, while same-store sales rose 3.5 percent. The company said the unexpected boost came mostly from Mervyn's.
No. 5 retailer Federated Department Stores, which operates chains such as Macy's, Bloomingdale's, Burdine's and Lazarus, said department store sales rose 2.4 percent to $1.13 billion, although a 10.9 percent decrease in direct-to-customer sales kept the company's overall sales gain to 0.6 percent at $1.29 billion. Same-store sales gained 1.6 percent in the period.
It wasn't only the discount chains that reported weaker sales. Luxury retailer Saks Inc. saw overall sales slip 1.4 percent to $493.6 million, as same-store sales fell 1.9 percent.
Talbots will beat estimates
The news wasn't all bad or sluggish, however. Women's apparel retailer Talbots Inc. announced better-than-expected sales gains for the period, with overall sales rising 21 percent to $158.5 million, while same-store sales rose 19 percent.
Those results allowed the company to raise earnings guidance for the just-completed fiscal third quarter to $1.06 to $1.08 a share, up from a forecast of $1.02 a share from analysts surveyed by First Call.
Another clothing retailer reporting strong sales was Limited Inc. Overall sales rose 8 percent to $650.5 million, while same-store sales also gained 8 percent.
Growing department store retailer Kohl's Corp. reported one of the stronger gains in sales, posting a 29 percent overall growth in sales in the month to $452.4 million. Same-store sales gaining 9.5 percent, up from a 6.5 percent increase in the same period a year earlier.
Shares of Talbots (TLB: Research, Estimates) shot up $6.44, or 8 percent, to $85.75 in trading Thursday, but shares of J.C. Penney (JCP: Research, Estimates) also gained, rising 56 cents to $11.81, despite its warning. Kmart (KM: Research, Estimates) shares also edged up 25 cents to $6.31.
Federated (FD: Research, Estimates) shares reversed earlier losses to climb 75 cents to $33. Meanwhile, Wal-Mart (WMT: Research, Estimates) shares were unchanged at $46.69, and Limited (LTD: Research, Estimates) climbed $1.69 to $26.56.
Target (TGT: Research, Estimates) shares dropped 31 cents to $27.25. Sears (S: Research, Estimates) gained 70 cents to $31.20, while Kohl's (KSS: Research, Estimates) slipped 25 cents to $54.81, and Saks (SKS: Research, Estimates) gained 37 cents to $10.25. 
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