New York NY, July 11--Several major retailers, including J.C. Penney Co. and Target Corp., shaved their second quarter earnings outlook, as they reported slow sales growth in June, their second most important month.
The belated arrival of warm weather at the end of June helped drive sales of air conditioners and bathing suits, but it came too late to help save retailers already hampered by a slow economy. Unusually wet weather in some regions, particularly the Northeast in May and early June forced heavy discounting of slow-moving merchandise to fuel sales.
Wal-Mart Stores Inc., the world's largest retailer, reported a small sales gain that was a bit below analysts' forecasts. Department stores continued to struggle, but there were some bright spots.
Gap Inc. again impressed Wall Street with double-digit gains, besting analysts' projections as it digs out from more than two years of disappointments. Swank Neiman Marcus Group Inc. also reported double-digit increases at stores opened at least a year, which well exceeded analysts' estimates.
“The results were modest, though we are slowly starting to see a bit more improvement. But it is not great,'' said Michael P. Niemira, vice president of Bank of Tokyo-Mitsubishi.
Bank of Tokyo-Mitsubishi Ltd.'s same store sales tally of 78 stores was up 2.4 percent for June, slightly better than the 2 percent gain Niemira expected. That compares to a 5.1 percent gain in the year-ago period.
The pace is above the sluggish 1.5 percent increase that had been seen from the August through April period. Retailers reported a 2 percent gain in May, compared with a year ago, but Niemira is hoping that June serves as a transition for much better sales increases.
He expects that same store sales will be up anywhere from 2.5 percent to 3.5 percent in July, when stores begin to ship back to school merchandise.
June is the second most important month in a retailers' sales calendar, behind December, accounting for 10.2 percent of annual revenues last year. It is the last chance for retailers to get rid of spring merchandise while also selling summer goods before making room for back to school merchandise.
But as Richard Jaffe, an analyst at UBS Warburg Securities, puts it, “Inventories were inflated and demand was low.''
Niemira added that “the economics that drive the industry is still kind of sluggish.''
Weather was clearly a factor in June retail sales results. This was the nation's sixth coldest June since 1895 when the National Climatic Data Center began tracking the data. It was also the seventh wettest since 1895, with the nation having 3.5 inches of rainfall on average, above the national average of 0.6.
Wal-Mart said that the belated arrival of warm weather helped fuel sales of apparel and air conditioners at the end of the month, but it said inventories were still above its goals. It noted in a pre-recorded call that inventories are growing more quickly than the company's target of half the sales pace.
The retailer posted same store sales for the company of 2.7 percent, slightly below the 3 percent gain estimated by analysts polled by Thomson First Call.
Target Corp. said same store sales increased a meager 0.8 percent, in line with the 0.6 percent increase forecast by Wall Street.
The department sector fared the second worst, behind footwear retailers, according to Niemira.
At J.C. Penney Co. Inc., same-store sales were up 0.1 percent for its department store business, which was about in line with the 0.4 decrease analysts projected. May Department Stores Co. reported that same-store sales were down 5.9 percent. At Sears, Roebuck and Co., same-stores sales for its domestic stores were down 1.8 percent. At Federated Department Stores Inc., same-stores results slipped 2 percent. Kohl's, a hybrid between a discounter and department store, had a 2.4 percent same-store sales decrease. Both Kohl's Corp. and TJX Cos. trimmed profit targets.
