Retailers Post Disappointing February Sales

New York, NY, March 8, 2007--The nation's retailers had a slow start to the spring season as unseasonably cold weather in February chilled demand for lightweight apparel and left merchants with disappointing sales. The slowing economy, particularly the weakening housing market, could challenge shoppers in the months ahead.

As merchants reported monthly sales results early Thursday, those with disappointing results included Wal-Mart Stores Inc., Costco Wholesale Corp. and Limited Brands Inc. High-end stores like Nordstrom Inc. continued their winning streak.

According to Thomson Financial, of the 51 merchants that reported February same-store sales results so far, 19 beat estimates, while 31 missed and one met expectations. Same-store sales are sales at stores open at least a year and are considered the best measure of a retailer's health.

The muted sales reports followed a rebound in January, when the late arrival of winter weather helped clear out cold weather items like boots and coats. But that meant there was little for shoppers to buy last month.

While February is one of the least important months of a retailer's calendar, merchants do hope to get some idea of which spring fashion trends are resonating with shoppers. Some retailers like J.C. Penney Co. are already seeing an improvement in sales in the current month. Still, there's concern that shoppers will finally turn frugal because of the housing market's continuing slump, and that last week's stock market tumble might also cause shoppers to be more conservative.

There's also the lingering specter of higher gasoline prices. Gas has jumped above $3 a gallon in some parts of California and Hawaii, and may reach that level in other parts of the country when the summer driving season approaches.

One bright spot is the healthy job market. The Labor Department on Thursday reported that the number of laid-off workers filing claims for unemployment benefits declined by 10,000 last week to 328,000 last week, the lowest level in a month.

Wal-Mart, dragged down by languishing sales at its namesake stores, reported a slim 0.9 percent gain in same-store sales, below the 1.5 percent estimate from Wall Street analysts surveyed by Thomson Financial. Wal-Mart's namesake division posted a 0.4 percent same-store sales gain, while Sam's Club had a 3.9 percent gain.

The world's largest retailer, which stumbled last year with a merchandising strategy that was too trendy, blamed the sales shortfall on the continued weakness in the home and apparel business. Wal-Mart said those two businesses should remain soft through the spring.

Rival Target Corp. enjoyed a 5.7 percent increase in same-store sales,above the 5.1 percent estimate.

Costco had a 4 percent increase in same-store sales, below the 5.1 percent forecast

Pier 1, which continues to struggle, saw same-store sales decline 8.4 percent, more than the 4.4 percent forecast. Sharper Image suffered a 24 percent drop, worse than the 16.7 percent decline projected by Wall Street.

Among department stores, Federated Department Stores -- which acquired May Department Stores Co. in 2005 and is transforming its Macy's brand into a national department store chain -- reported a 1.2 percent same-store sales, below the 2.8 percent estimate.

"Sales in February were impacted by a series of snow and ice storms in the eastern half of the U.S., including those during the important selling days immediately preceding Valentine's Day," said Terry J. Lundgren, chairman, president and CEO in a statement.

Penney had a 0.2 percent decline in same-store sales in its department store business, somewhat better than the 0.5 percent decline analysts expected. The company said sales improved at the end of last month, particularly in areas where the weather turned warm.

Meanwhile, high-end stores continued to shine. Nordstrom reported a 9.1 percent increase in same-store sales in February, beating the 5.7 percent estimate.

On Wednesday, at Saks Inc., which operates Saks Fifth Avenue, same-store sales surged 24.7 percent, helped by higher sales of full-price merchandise and an end-of-season consolidation sale in certain flagship stores. Analysts expected 6.4 percent.