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Grim Picture of Recovery in Forecasts by Retailers

August 15, 2013 by

Major retailers, like Walmart and Kohl’s, that cater to budget-conscious customers with lower incomes cited sluggish sales this week as they decreased their annual forecasts. Macy’s, with a slightly higher-income clientele, did not meet analysts’ expectations for the first time in 25 quarters.

But even upper-income consumers do not seem to be spending as freely as some hoped. While Nordstrom’s, which reaches a middle-to-luxury-end market, reported a higher-than-expected quarterly profit on Thursday, it too said sales “remained softer than anticipated” and lowered its forecast.

The latest sales reports painted a bleak picture for a sizable swath of the retail sector even as other economic indicators, like an increase in auto loans, showed signs of consumer confidence.

“There is a certain segment of the population that is faring well in this economy and have seen their net worth rise sharply with stock and housing market gains,” said Ken Perkins, president of Retail Metrics. “Then there is the much larger segment of Americans that are working in low-wage jobs, part-time jobs, that are struggling to make ends meet and are living paycheck to paycheck. They are not spending beyond necessities.”

In a call with reporters Thursday, Walmart’s chief financial officer, Charles M. Holley Jr., said there was “a general reluctance of customers to spend on discretionary items right now.”

As the back-to-school season reaches its peak, some retailers are not optimistic that they could see a big revival among shoppers. “The expectations through the end of the year are really through the lens of the cautious consumer,” Mr. Holley said.

A few major factors have impeded progress for a lot of Americans as the country wades out of the recession. Job-market growth has been decent, but the jobs added have not.

“A lot of the gains have been in extremely low-paying sectors: retail, health care, temporary employment,” said Joshua Shapiro, chief economist at MFR. When it is not full-time work, he said, benefits are low to nonexistent.

“If you dig below the surface, it’s not that wonderful of a picture,” he said.

Retailers also singled out the payroll-tax increase as one reason consumers were feeling thrifty.

“If you’re making around $50,000 a year, that’s $40 a paycheck that our customer doesn’t have that they would’ve had last year” Mr. Holley said.

While retailers tend to offer excuses for missing quarterly results — good weather, bad weather, sporting events — economists agreed that the tax increase was affecting stores’ sales.

“In terms of people who are paycheck to paycheck, which is a good chunk of this country, and certainly a good chunk of lower-end retailers’ customers, it has a significant effect,” Mr. Shapiro said.

Other economic indicators, like the upswing in the housing and stock markets, have not meant much to low-income shoppers.

In the housing market, “first-time buyers, in particular, have been waning,” said Diane Swonk, chief economist at Mesirow Financial.

Mr. Shapiro said many sales are due to “speculative institutional demand,” not typical home buyers.

Teenagers, too, are having a rough time, as shown by a recent earnings report from Aeropostale and an earnings warning from American Eagle.

“Teenagers have not had jobs for a while, and have to compete with older workers, and the back-to-school market’s not looking terrific this year,” Ms. Swonk said. “It’s about the unevenness of the recovery across both age and income groups.”

For Wal-Mart Stores, profit increased by 1.3 percent, to $4.07 billion, for the quarter and sales rose 2.4 percent, to $116.2 billion, both missing analyst estimates. The key measure of same-store sales dropped 0.3 percent in the United States; analysts had expected a 0.7 percent increase.

The company’s international unit, which had until recently been growing at a fast clip, also turned in sluggish quarterly results, with sales growing 2.9 percent, to $33 billion.

“We’ve seen customers both in mature and emerging markets curb their spending,” said C. Douglas McMillon, chief executive of Wal-Mart International. “We believe that environment is going to remain through the end of the year.”

The company decreased its full-year guidance for net sales growth to 2 percent to 3 percent, from 5 percent to 6 percent.

Also, “somewhat uncharacteristically for Wal-Mart,” according to a Sanford Bernstein analyst, Colin McGranahan, the company lowered its annual earnings per share forecast, to $5.10 to $5.30 from a previously issued $5.20 to $5.40.

Nordstrom’s quarterly profit of $0.93 per share was above analyst expectations for $0.88 a share. But it, too, lowered its annual forecast, to $3.60 to $3.70 a share versus its earlier outlook of $3.65 to $3.80.

Kohl’s, which also reported results Thursday, said its quarterly profit fell 3.5 percent, and also lowered its annual earnings-per-share forecast, to $4.15 to $4.35, down from $4.15 to $4.45.

The results added to worries about the retail sector.

“We believe that much of our weakness is due to the health of the consumer,” Macy’s chief financial officer Karen Hoguet told analysts.

Macy’s on Wednesday lowered its annual forecast, to $3.80 to $3.90 a share from $3.90 to $3.95 a share.

“When we do see good things in the economy, sometimes they don’t immediately flow through to a paycheck. Remember how the average American lives,” said Mr. McMillon of Walmart.

Article source: http://www.nytimes.com/2013/08/16/business/wal-mart-lowers-outlook-as-consumers-hold-back.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Sales at Nation’s Retailers Fell Short of Expectations in November

November 30, 2012 by Leave a Comment

The reporting period included Thanksgiving and Black Friday, the official kickoff of the critical holiday shopping season. Early reports regarding those days had been mixed, and the individual retailers’ dim results suggest a big challenge in the coming weeks for retailers.

Craig Johnson, a retail consultant and president of Customer Growth Partners, said that early November was weak across the board and not just in the Northeast, which was hit by Hurricane Sandy in late October.

“The traditional post-Black Friday lull, normally starting the following week, started on … Black Friday,” Mr. Johnson wrote in an e-mail. Activity in shopping malls slowed down starting about noon that Friday, he said, “right about the time the early bird specials expired, and long after the Thanksgiving evening doorbuster items were all sold out — leaving financially stressed consumers with little reason to shop” so many weeks away from Christmas.

Over all, the 16 retailers tracked by Thomson Reuters that reported results Thursday recorded a 1.6 percent increase in sales at stores that were open at least a year. Analysts had expected a 3.3 percent jump.

It was the major chains’ results that were most troubling. Target, Kohl’s and Macy’s typically promote holiday shopping heavily, while Nordstrom sales tend to give an indication of how higher-income consumers are feeling.

Kohl’s sales at stores open at least a year dropped 5.6 percent, recording negative sales in all regions. Analysts expected a 1.9 percent gain. The company seemed to be the victim of its own “showrooming,” when consumers visit stores to see the merchandise but end up buying online. The company noted “a significant shift in Black Friday-related sales into our e-commerce channel.”

Target’s sales at stores open at least a year fell 1 percent, and its overall sales for the month decreased 0.1 percent from last November. Analysts had been looking for a 2.1 percent increase. Gregg Steinhafel, chief executive, said in a statement that profitability “remained on plan.”

Nordstrom, where same-store sales fell 1.1 percent, said the problem was a weaker-than-expected clearance sale. “Customers continue to demonstrate a strong preference for fashion and newness, which has made clearance events less compelling,” the company said. Hurricane Sandy also hurt sales in the first part of the month, it said. Analysts had projected a 4.3 percent increase.

Macy’s same-store sales fell 0.7 percent, missing analyst expectations of a 1.5 percent increase. The company said it had the largest-volume Thanksgiving weekend in its history — meaning the highest number of transactions, though not necessarily sales — but blamed Hurricane Sandy for the month’s decline.

Many of the nation’s big retailers no longer report same-store sales, including Walmart, the largest, J. C. Penney and Saks. Early on Black Friday morning, Walmart sent out a statement reporting larger crowds than last year at its stores.

Specialty and warehouse stores fared better than the large chains. Costco posted a 6 percent rise in same-store sales, half a percentage point above analysts’ expectations. Limited, the parent company of Victoria’s Secret, said same-store sales rose 5 percent. Gap missed its 3.9 percent estimated increase, but still posted a 3 percent rise. Same-store sales rose 13. 2 percent at Stage Stores and 7.1 percent at Stein Mart, two small chains.

Some shoppers said the deals this year were not good enough to get them to buy. “We looked through the ads and didn’t see anything we really wanted,” said Lisa Apple, 46, who was shopping in Columbus, Ohio, on Black Friday. “The good deals were on TVs, but how many TVs do you need?”

Another shopper, Laura Schimpf, 32, who lives in Delaware, Ohio, and works for the state’s government, agreed. “The deals don’t seem too good. We really had to hunt for good ones. I’ve been looking online for three weeks,” she said.

Christopher Maag contributed reporting from Columbus, Ohio.

Article source: http://www.nytimes.com/2012/11/30/business/sales-at-nations-retailers-fall-short.html?partner=rss&emc=rss

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Wal-Mart to Bring Back Layaway

September 8, 2011 by Leave a Comment

Wal-Mart had scrapped layaway in 2006, saying that so many customers were using credit cards or gift cards that the program was obsolete. Now, though, consumers are demanding it, said Duncan Mac Naughton, chief merchandising officer for Wal-Mart’s United States stores.

“It just tells us the customer’s still struggling, as they tell us about their concerns with energy prices, housing prices, the job security, that 9.2 percent unemployment — it tells us that this is a fragile economy and the customer needs our help,” Mr. Mac Naughton said.

Layaway means that a store sets aside a product and requires customers to pay for it over time, usually charging a small service fee but no interest. With layaway, someone living paycheck to paycheck could potentially afford a more expensive item than otherwise, given the extra time to pay for it.

It was a common way to pay for expensive items through much of the 20th century. But as credit cards became popular, layaway dwindled and was mainly used by lower-income consumers who could not qualify for credit cards.

That has been changing in the last couple of years. As the recession hit and the recovery dragged on, some Wal-Mart competitors have offered layaway. Toys “R” Us started offering layaway on expensive items in 2009, while Sears brought back layaway in 2008 after a long hiatus. (Sears Holdings’ Kmart division has offered layaway for decades.)

The other retailers’ jump on layaway puts Wal-Mart into the unusual position of being a holiday season follower. Because of its size, it often sets the standards that other stores follow over the holidays, whether that is pricing on toys or its offer last year of free shipping on hundreds of online items.

Now, with nine consecutive quarters of declining same-store sales in the United States, and having said that improving those sales is a central focus, Wal-Mart is struggling to figure out how to get its consumers to spend. Executives have said throughout the year that shoppers are increasingly shunning credit and paying with cash, and are running out of money at the end of the month.

Wal-Mart’s revival of layaway indicates it does not expect consumers to feel flush anytime soon.

The layaway program will “alleviate the pressures they may have in their homes,” Mr. Mac Naughton said. “We think this is an opportunity for a cash-paying customer to create a payment program on their own time.”

Wal-Mart is limiting the program’s scope and time frame. Only toys and electronics may be paid for on layaway, starting Oct. 17 and ending Dec. 16. Each item must cost $15 or more, and the total layaway purchase must be $50 or more. There is a $5 service fee, and a 10 percent down payment is required.

Other retailers have similar conditions: Sears has a $5 service fee and a 20 percent down payment, while Toys “R” Us has a $10 service fee and 20 percent down payment.

On a site where shoppers can offer feedback to Wal-Mart, layaway has been one of the more popular suggestions.

A commenter by the name of PamS wrote that even when she set aside money for gifts, “the saved money usually gets used for some other unexpected bill or what not; whereas if I was able to do layaway I feel I could better budget and especially for special holidays.”

“I know for some the idea of layaway probably seems silly; but for those of us on very fixed and limited incomes, it does help,” she wrote.

Another commenter, SueH, had a similar view.

“I can’t get many things now either,” she wrote. “I don’t make enough money to pay all at one time. I can’t do extra for my grandkids. Please bring back layaway.”

Other shoppers said they were going to competitors because of their layaway programs. “You would think in this economy every store would have it! During Christmas I have to shop at Kmart cause of the layaway,” wrote a commenter under the name “wishing” on a West Virginia forum.

Mr. Mac Naughton also outlined other plans for the holiday season. Holiday merchandise will hit stores in mid-October, about two weeks earlier than usual, he said. And Wal-Mart will put a number of toys on sale for $15 starting Monday, including some Lego play sets and Princess Toddler dolls from Disney.

Article source: http://feeds.nytimes.com/click.phdo?i=87f13391440734faad7b6876153cab95

Filed Under: Economy News Tagged With: , ,