New Year Brings Same Slow Retail Sales

MSN Money/CNBC/Reuters ^ | January 13, 2003 10:31:00 AM ET | Emily Kaiser

[arete]

CHICAGO (Reuters) - Major U.S. retailers started the new year about the same way they ended the old one, with Wal-Mart Stores Inc. (WMT) and others on Monday reporting tepid sales at or below expectations so far in January.

Analysts expect no quick fix for the retail sector this year, coming off a disappointing holiday sales season that showed the smallest sales gain in more than 30 years.

The sector is likely to underperform the broader market, analysts said, hamstrung by a sluggish economy, the nagging threat of war with Iraq, price deflation and a general lack of must-have new products.

Wal-Mart, the world's biggest retailer, said its sales at stores open at least a year, or same-store sales, so far were meeting its January expectations for a 2 percent to 4 percent gain. That's a far cry from the 8.3 percent same-store sales growth it reported in January 2002.

The retailer said customers were buying mainly basics such as underwear and pet supplies, and its inventory was slightly higher than it would like.

J.C. Penney Co. Inc. (JCP) had the opposite problem, saying its January sales were suffering because it had little inventory left to discount after a stronger-than-expected holiday sales period, which was powered by aggressive advertising and markdowns.

The retailer said same-store sales at department stores were below its expectations for a flat to slightly higher monthly performance. Last year, its January same-store sales rose 5.9 percent.

J.C. Penney's December same-store sales jumped 4.7 percent, making it one of the few large retailers to beat its holiday sales forecast.

Federated Department Stores Inc. (FD), the parent of Macy's and Bloomingdale's, said it expected January same-store sales to be down 4 percent to 5 percent from a year ago. Last year, its January same-store sales dropped 8.8 percent.

TOUGH YEAR

Retail stocks have outperformed the broader market in the last two years, but that run looks set to end in 2003, J.P. Morgan retail analyst Shari Eberts said.

Eberts, who lowered her rating on upscale retailer Saks Inc. (SKS) to ``underweight'' on Monday because the stock looked pricey, said same-store sales across the sector would likely languish this year.

``We see no easy fixes on the horizon in 2003,'' she said. ``While consumer spending is likely to remain at today's average rate of growth, structural issues like overcapacity, a lack of product newness and deflation should prevent attractive margins and returns for all but the best retailers.''

Many retailers managed to sustain earnings in 2002 by keeping inventories tight, which helped boost gross margins despite sluggish sales growth. Eberts said those margin improvements will be harder to come by this year.

To make matters worse, price deflation is likely to weigh on same-store sales. As retailers find cheaper manufacturers, selling prices come down, meaning stores have to sell more items just to keep same-store sales flat.

For example, a DVD player that cost $200 last year may cost just $100 this year, so the store would have to sell two to match last year's dollar sales total.

``Deflation is likely to continue in 2003, keeping sales dollars under pressure even if unit sales are healthy,'' J.P. Morgan's Eberts said.

[arete]

Consumers must be running out of money cause they sure aren't running out of credit. All this after CNBC had a retail sales analyst on saying how great things are in retail.

Richard W.

[Mo1]

PLEASE SUPPORT FREE REPUBLIC

Donate Here By Secure Server

Or mail checks to
FreeRepublic , LLC
PO BOX 9771
FRESNO, CA 93794
or you can use
PayPal at Jimrob@psnw.com

Become A Monthly Donor
STOP BY AND BUMP THE FUNDRAISER THREAD

[MinuteGal]

Retailers are always moaning and complaining when their greedy high expectations are not met every holiday season.

They should be damned grateful they're getting by, just like all of out here.

Leni

[Blood of Tyrants]

This is the usual liberal B.S. Sales were NOT bad during Christmas. In the typical liberal fashion, the Rats' lackeys took good news and turned it into bad. Specifically, sales during Christmas wher HIGHER than the previous year, they just weren't as high as retailers had hoped, thus according to those who wish for a bad economy (Rats) sales were "off".

Only in the land of politics is MORE than last year, but less than what you wanted called a "cut".

[Dave S]

Only in the land of politics is MORE than last year, but less than what you wanted called a "cut".

Hope you remember that when you dont get a raise or its lower than you typically get.

[Blood of Tyrants]

And why wouldn't I remember it? I don't play Rat games and use weasel words to lie to people. I got a nice little raise this year, thank you.

[arete]

I think that you may be confusing the reality of business with your political bias.

Richard W.

[Blood of Tyrants]

Nope. You can look it up yourself. Retail sales were higher in 2002 than in 2001, which itself was an all time record. To me, that equates an INCREASE in sales. But I am willing to bet that for the past several years, that retailers have reported "disappointing" sales.

[Blood of Tyrants]

P.S. Isn't January typically a slow sales month? People are tapped out from Christmas spending.

[Dave S]

I think that you may be confusing the reality of business with your political bias.

I think his whole world is based on a nice neat ideology. If real life doesnt match it, it makes him very uncomfortable. Bush, on the other hand, is aware that retail sales stink and he is not hiding his head in the sand like some.