New York, NY, August 30, 2006--The nation’s major retailers reported results for August; the winners included Wal-Mart and Federated Department Stores. J.C. Penney Co., was among the big disappointments and Gap Inc., again struggled with its fashions.
Overall, "the early signs are that back-to-school is doing better than expected," said Jharonne Martis, an analyst at Thomson Financial. "Parents have budgeted for back-to-school. There is no stopping the consumer."
According to Thomson Financial, of the 40 retailers that have reported same-store results so far, 21 beat estimates, while 19 missed. Same-store sales are sales at stores open at least a year and are considered a key measure of a retailer's health.
The solid performance in August--a time when stores aim to do the bulk of their back-to-school business--is comforting as many analysts expect a consumer spending slowdown in the second half; their concerns were heightened after June's sales stalled but business rebounded in July, helped by clearance sales of summer goods. After a slow start, business in August gained momentum even as concerns increased about the consumer's resilience.
Wal-Mart, which benefited from a more focused back-to-school advertising campaign aimed directly at teens, had a 2.7 percent gain in same-store sales. Analysts polled by Thomson Financial expected a 2. 5 percent gain.
"We saw sales momentum for the August period build throughout the month. Our customers focused spending on food, consumables and items for back to school," said Tom Schoewe, executive vice president and chief financial officer of Wal-Mart.
Target Corp. reported a 2.8 percent rise in same-store sales. However, analysts had expected it to post a gain of 3.1 percent.
Costco Wholesale Corp. reported a 5 percent increase in same-store sales, missing the 5.7 percent estimate. The wholesale club operator issued the sales report as it warned that fourth-quarter profit would be below analysts' estimates, as sales on items like jewelry and furniture slowed and the company struggled with higher gas prices.
Kohl's Corp. said same-store sales rose 5.2 percent in August. The average estimate of analysts polled by Thomson First Call was for a same-store sales increase of 3.5 percent for August. Christine Augustine, an analyst at Bear Stearns Cos., said the company was "well-positioned to capture middle-market sales from industry consolidation."
Federated, which acquired May Department Stores Co., last year, had a 3.8 percent gain in same-store sales, slightly better than the 4.0 percent Wall Street expected. Same-store sales include only Macy's and Bloomingdale's. On Sept. 9, Federated will be converting most of its former May Co., locations to the Macy's brand.
Nordstrom said its same-store sales rose 7.1 percent; analysts expected a 3.3 percent gain.
Penney posted a 0.5 percent decline in same-store sales in its department store business, below the 1.8 percent increase analysts had expected.
The NRF's survey showed spending would be higher in all categories, but electronic and apparel purchases were to fuel this year's back-to-school growth. As for apparel, the average consumer was expected to spend $228.14, up from $205.31 in 2005.
