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News > Companies
Chain store sales mixed
July 12, 2001: 2:12 p.m. ET

Wal-Mart, Penney post June sales gain; Sears flat, others decline
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NEW YORK (CNNfn) - Continued pressure from layoffs and a sluggish economy kept price-conscious consumers picking through discount chains and away from department stores last month as major U.S. retail chains reported mixed June sales Thursday.

Wal-Mart Stores Inc. (WMT: up $2.37 to $51.22, Research, Estimates), the world's biggest retailer, saw big gains in June, while other discount chains such as Kohl's Corp. (KSS: up $0.65 to $58.99, Research, Estimates) and Target Corp. (TGT: up $2.19 to $35.57, Research, Estimates) saw more modest sales growth.

But that's a far cry from the department stores such as Macy's and Bloomingdale's parent Federated Department Stores Inc. (FD: up $0.05 to $38.46, Research, Estimates), May Department Stores Inc. (MAY: up $0.48 to $31.71, Research, Estimates) and Sears Roebuck & Co.(S: up $2.63 to $44.25, Research, Estimates)  which struggled with a lack of hot fashions that hurt apparel sales, and a sluggish economy that siphoned customers to discount chains.

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Cost-conscious consumers have shifted to discount chains (CNN/FILE)
Consumer spending, which fuels two-thirds of the U.S. economy, has remained surprisingly strong in the last year, helping to keep the tumbling economy out of a recession.

Though there's no doubt spending is sharply lower than year-earlier levels, consumers have shown that they still are willing to buy -- albeit streamlined purchases if the price is right. That's in spite of rising unemployment, and high energy prices.

For example, Family Dollar Stores Inc. a Matthews, N.C. discount chain, reported sales at stores open at least a year, increased 3.6 percent in June.

"Can consumer spending continue to run the engine of retailing? I think the answer to that is as long as people feel secure in their jobs, they will continue to spend," Rick Gallagher, vice president of the National Retail Federation, said in an interview with CNNfn.com earlier this week. "I don't think that we've seen consumer psychology change even though unemployment numbers are higher... We are seeing a lot of layoffs announced, but we're not seeing a lot of people out for long. They're coming back relatively quickly."

The housing market has also remained strong, with Americans continuing to buy new and existing homes at a steady clip, and furnishing and decorating those homes. Sales of such big-ticket items as appliances and automobiles have remained robust. And gasoline prices have begun to retreat after spiking higher in the first few months of 2001.

Analysts anticipate a recovery for retailers in the second half of 2001 as the back-to-school and holiday seasons kick in and the Federal Reserve's six interest rate cuts this year begin to take effect. Manufacturing also has shown signs of stabilizing and Americans are expected to cash in their tax rebate checks from President Bush's tax-cut package.

Fed Chairman Alan Greenspan and his colleagues will be closely eyeing consumer activity as it considers another rate move at its meeting Aug. 21.

Discount chains fare better than department stores

Wal-Mart said its same-store sales rose 6.9 percent in the five weeks ended July 6, compared with a 5.9 percent gain in the year-earlier period. The company and analysts had forecast a same-store sales gain of 3 to 5 percent.

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Overall sales for the world's biggest retailer rose 14.6 percent to $17.9 billion, better than the 12.9 percent growth in year-to-date sales.

Kmart Corp. (KM: up $0.36 to $10.84, Research, Estimates), the nation's No. 3 retailer, had a same-store sales gain of 1.1 percent for the five-weeks ended July 4, slightly better than the 1.0 percent year-to-date increase in that measure. Overall worldwide sales slipped 0.1 percent to $3.53 billion from $3.54 billion a year earlier.

No. 4 retailer Target said its sales were slightly less than plan due to weakness at its Mervyn's and Marshall Field's department stores. Overall same-store sales gained 0.8 percent thanks to its discount Target stores, which met expectations.

Fast-growing department store chain Kohl's had a modest same-store sales gain of 1.7 percent in the period, below its year-to-date same-store sales growth of 4.0 percent. But the continued opening of new stores led to a 15.9 percent increase in overall sales to $571.6 million.

Robertson Stephens retail analyst Bill Dreher said Kohl's results were surprising given that the company has consistently posted an average 5 percent sales gain every month. He attributed the decline in part to the company's delay in opening its New York area distribution facility to support the stores it opened in the region in the last few years.

Slower gains at department store chains

Sears, the nation's No. 2 retailer, said its domestic sales at stores open at least a year, a key gauge known as same-store sales, slipped 0.5 percent for the five weeks ended July 7, as overall domestic sales were flat at $2.81 billion.

Sears, which said Tuesday it plans to exit the cosmetics business, quashing a contract with Avon Products Inc. (AVN: up $0.10 to $5.41, Research, Estimates), also said it expects to report earnings per share of 96 cents for the quarter ended June 30. That was in line with its previous guidance, but better than the 92-cent-a-share forecast of analysts surveyed by earnings tracker First Call.

J.C. Penney Co. (JCP: up $1.62 to $26.25, Research, Estimates) said sales beat its own internal targets in each of the five weeks of its reporting period.

The Plano, Texas-based company, which is in the midst of a turnaround, said same-store sales for its department stores gained 3.8 percent for the five weeks ended June 30, as the company benefited from strong Father's Day sales. Same-store sales of its Eckerd drugstore divisions rose 7.0 percent. Overall sales slipped 0.8 percent to $2.77 billion from $2.79 billion a year earlier, due to weakness in catalog sales.

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  Federated Department Stores Inc., which operates Macy's and Bloomingdale's and recently shut its Stern's chain, said same-store sales fell 6.4 percent for its department store segment, while its direct sales Fingerhut unit had a 42.7 percent sales decline as it went through a restructuring. Those declines plus the closing of Stern's led to a 10.4 percent overall decrease in sales for the period.

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Separately, Federated announced plans to re-launch its macys.com online sales unit.

Some chains see sales declines

Gap Inc.(GPS: up $1.82 to $27.72, Research, Estimates),  which operates the specialty apparel chains Banana Republic, Old Navy and Gap, reported a 7 percent drop in same-store sales, sharply lower than the 2 percent decline it reported the previous month. The company blamed aggressive markdowns for the weakness.

Same-store sales declined at specialty retailers Limited Inc. (LTD: Research, Estimates), AnnTaylor Stores Corp. (ANN: Research, Estimates) and Intimate Brands Inc. (IBI: Research, Estimates), which includes both Victoria's Secret and Bath & Body Works.

Luxury hard-goods chain Sharper Image Inc. (SHRP: down $1.23 to $9.04, Research, Estimates) reported a 15 percent falloff in June same-store sales and a 1 percent decline in overall company sales. That's far below the 34 percent sales gain it posted a year earlier. graphic

  RELATED STORIES

Major retailers report weaker sales in May - Jun. 7, 2001

Sluggish May sales expected from retailers - Jun. 6, 2001

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.