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Retail sales gains slow
May 10, 2001: 12:42 p.m. ET

Sears, Kmart, Penney, Federated up modestly in April; Wal-Mart growth slows
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NEW YORK (CNNfn) - Sales at some of the nation's largest retail chains showed only modest gains in key measures of April sales Thursday as consumers continued to fret about layoffs and the slowing economy.

Wal-Mart, Sears, Kmart, Target and J.C. Penney all posted slim gains. Troubled retailer Gap Inc.'s monthly sales declined, but the owner of Banana Republic, Old Navy and Gap stores said it anticipated beating Wall Street's lowered first quarter earnings estimates.

Nervous consumers zipped up their wallets in April, restricting spending to mostly home products and necessary items, particularly lawn and garden goods and summer clothing.

  Americans are being bombarded with announcements of layoffs ...That means a lot of people who have decent jobs and good income hear that little voice in the back of their head asking the question 'could my number be up next?'  
  Kurt Barnard
Barnard's Retail Trend Report
"Americans are being bombarded with announcements of layoffs. Anytime you listen to the radio it's always 3,000 laid off here, 500 there," said Kurt Barnard, president of Barnard's Retail Trend Report in Upper Montclair, N.J. "That means a lot of people who have decent jobs and good income hear that little voice in the back of their head asking the question 'could my number be up next?' They're buying what they need, but they don't buy frivolously."

April saw a clear shift away from department stores and upscale retailers to the discount chains such as Wal-Mart, Kmart and Sears, Barnard said.

Many specialty retailers posted gains in the month, partly because they cater to young people whose spending habits are less prone to economic conditions. However, Credit Suisse First Boston retail analyst Richard Baum said successful specialty stores such as American Eagle and Abercrombie & Fitch reflected good execution and the right mix of goods.

The report comes a day before the latest government report on monthly retail sales. The figure has become increasingly important to economic policy makers since store sales, which account for two-thirds of the U.S. economy, offer a glimpse at consumer confidence and spending.

Though consumer spending has been lackluster, the housing market remains strong and people will spend money to furnish their new homes.

Further positive news came Thursday when the government reported a decline in first-time claims for unemployment benefits.

Yet that's will not likely dissuade the Fed from another interest rate cut.

The Fed's policy-making arm is expected to slash rates for the fifth time this year when it meets next Tuesday as it tries to avert a recession. Despite Thursday's positive jobless claims data, the Fed is weighing it last Friday's unemployment report, which showed unemployment jumped to a two-and-a-half-year high.

The last rate cut came April 18, between meetings, which surprised investors and economists, who had all but abandoned any expectations for an inter-meeting move.

Modest gains for most chains

Bentonville, Ark.-based Wal-Mart Stores Inc. (WMT: up $1.83 to $53.42, Research, Estimates), the world's largest retailer, said sales at its stores open at least a year, a closely watched measure known as same-store or comparable-store sales, rose 6.5 percent for the four weeks ended May 4. But that's off of the 8.4 percent gain posted in the same period a year earlier.

The overall company numbers were helped by bigger sales gains at its Sam's Club wholesale unit, where same-store sales gained 8.3 percent.

On April 12, Wal-Mart warned it would miss Wall Street's first-quarter estimates by a penny a share.

No. 2 retailer Sears Roebuck & Co. Inc. (S: up $1.58 to $38.08, Research, Estimates) reported a 1.3 percent gain in domestic same-store sales in the four weeks ended May 6, but that was down from the 2.2 percent rise for the 13-week period ended that date. The company described the sales environment in April as challenging, but said it saw pockets of strength in lawn and garden, appliances, footwear, and sporting goods sectors.

Discount chain Kmart Corp. (KM: up $0.50 to $10.98, Research, Estimates), the No. 4 retailer, reported a 1.1 percent increase in same-store sales. But that left overall sales of the Troy, Mich.-based retailer off 0.4 percent to $2.76 billion. Still the chain said the results marked the sixth straight month that same-store sales either met or exceeded its goal for the period.

Troubled retailer J.C. Penney (JCP: up $0.86 to $21.40, Research, Estimates) also posted modest same-store sale gains, lifted mostly by improvement at its Eckerd drugstore chain.

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The Plano, Texas-based retailer said same-store sales in its department store unit gained 3.8 percent, while Eckerd posted a 7.7 percent gain. Overall sales increased 1.4 percent from a year earlier.

Federated Department Stores Inc. (FD: up $1.69 to $43.07, Research, Estimates), the Cincinnati-based owner of Macy's and Bloomingdale's, said same-store sales gained only 0.8 percent in the month, and a downsizing of its Fingerhut unit led to a 4.4 percent decline in overall sales to $1.24 billion.

Many specialty retailers posted solid gains in April.

Abercrombie & Fitch (ANF: up $3.71 to $37.60, Research, Estimates) reported a 6 percent increase in same-store sales while overall sales soared 23 percent to $65.7 million. American Eagle's (AEOS: up $1.36 to $40.95, Research, Estimates) same-store sales increased a whopping 22.7 percent compared with a year ago. Total sales grew 53.6 percent to $88.7 million.

Brookstone Inc. (BKST: down $0.01 to $16.05, Research, Estimates) said same-store sales increased 1.7 percent, same-store sales at the Children's Place (PLCE: up $4.18 to $28.58, Research, Estimates) grew 10 percent, AnnTaylor Stores Corp. (ANN: up $1.66 to $32.91, Research, Estimates) sales increased 1.2 percent, and Cato Corp. reported an 8 percent increase.

Other specialty chains did not fare as well in April. Limited Inc. (LTD: up $0.10 to $16.90, Research, Estimates) reported a 2 percent decline in same-store sales. Intimate Brands Inc., a publicly traded subsidiary of Limited that operates Victoria's Secret, reported an 8 percent decline.

Apparel retailer Gadzooks Inc. reported a 2.9 percent decline, while Pacific Sunwear Inc. (PSUN: down $3.39 to $21.20, Research, Estimates) fell 4.1 percent. graphic