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September sales soft.

NEW YORK -- September sales increases were subdued, as unusually warm weather inhibited fall clothing purchases. The most acute pain was felt by department stores and apparel specialty retailers, but discounters largely failed to meet Wall Street's forecasts as well. At Wal-Mart Stores Inc., total comparable-store sales in the United States rose 1.4%, as a tepid 0.8% rise in the Wal-Mart Stores USA division was surpassed by the Sam's Club unit, which recorded a 4.4% increase excluding fuel sales and a 4.1% gain with fuel. In the Wal-Mart Stores segment, pharmacy and grocery provided the impetus as sales of apparel and home products remained soft.

Rival Target Corp., meanwhile, turned in a disappointing 1.2% increase in comparable-store results. "Our comparable-store sales growth in September was below our planned range, particularly in apparel," says chairman and chief executive officer Bob Ulrich. "As a result, we now believe that our full-year earnings per share will be below $3.60."

As results at Wal-Mart's Sam's Club division indicate, it was a much better month for warehouse club operators. Costco Wholesale Corp. saw September comparable-warehouse sales advance 6%, rebounding from a subpar August increase of 2% and comfortably ahead of the 4.7% consensus estimate of analysts surveyed by Thompson Financial.

Analysts were also pleasantly surprised by the No. 3 club chain, BJ's Wholesale Club Inc., which posted a 3.9% rise in comparable-club sales that easily beat their 2.2% average forecast. According to management, the improvement was driven by strong results in the metropolitan New York area and a 5% increase in the average transaction (excluding gasoline) that offset a 1% drop in customer traffic. BJ's food departments led the performance with 6% growth that outpaced a meager 1% rise in general merchandise. In the GM section strong gains were recorded for small appliances, televisions and toys, but apparel, furniture, prerecorded video and tires lagged.

Regional discounter Fred's Inc. turned in a 1% gain in comparable-store sales, well off the 5% increase recorded last September. "September sales came in at the low end of our forecasted range of a 1% to 3% increase, affected by unusually warm weather across our markets and the disruption caused by the updating of 98 stores under our refresher program," explained chief executive officer Michael Hayes.

Modest growth was also the result at Family Dollar Stores Inc., which posted a 0.5% increase in comparable-store sales, which suffered from a weak apparel business. The dollar-store operator estimates that comparable-store results for October will grow by up to 2%.

Mass Market Sales--Sept. '07

                  Overall sales    Same-store sales

Drug Chains             7.6             4.9
Supermarkets            2.9             1.5
Discounts Strs.         6.1             2.9

Year-to-Date Performance

                  Overall sales    Same-store sales

Drug Chains               8             5.8
Supermarkets            2.9             1.4
Discounts strs.         5.3               3

Source: Racher Press Research

Note: Table made from bar graph.
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Date:Oct 29, 2007
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