New York, NY, October 5, 2006--Retailers had a wave of chilly weather, a late start to back-to-school shopping and a fall in gas prices to thank for unusually strong same-store sales in September.
Across the board, retailers turned in better-than-expected same-store sales results during the month.
The early results on Thursday had retailers delivering extremely strong gains in same-store sales, the closely-watched barometer of retail growth measuring sales at stores open longer than a year. By a margin of roughly 3-to-1, more retailers outpaced forecasts than missed those reached by analysts reporting to Thomson Financial. Same-store sales are a closely watched
Kohl's Corp. set the pace on Tuesday when it said that all regions of the country posted double-digit gains in same-store sales, pushing the retailer's results higher by 16.3%. That was well ahead of the 8% average increase at Thomson Financial.
It was the largest September surge in four years, which ThinkEquity Partners analyst Edward Weller attributed to the Kohl's having the right clothes for the temperature swings, among other things.
"The weather helped," he said in a research note, "but the company must have been doing other things right as well to post such a solid sales increase."
It was clear earlier this week that Wal-Mart Stores Inc.'s results would be the aberration when it said Wednesday that same-store receipts inched up 1.3% in September and the world's largest retailer confirmed it Thursday.
Wal-Mart said its stores and clubs were "negatively affected" by difficult comparisons to last year's sales run-up ahead and after hurricanes Katrina and Rita hit the Gulf Coast.
But Tom Schoewe, chief financial officer, also noted that clothing sales were sluggish. "Our apparel sales did not meet our expectations for the month," Schoewe said.
"We're pleased, however, to see early response to seasonal merchandise for fall and the holidays," he said, adding that the retailer is "optimistic" about holiday-related merchandise like toys and electronics.
At the Wal-Mart units, comparable-store sales rose 1.3% while they were up only 1.1% at Sam's Clubs. Total sales rose 11.8% to $31.21 billion.
Costco Wholesale Clubs was another big-box retailer to miss Wall Street's expectations because of tough year-over-year comparisons. And, like Wal-Mart, investors had hoped that the drop in gas prices would offset last year's extraordinary weather-related gains.
However, it was gas prices that hurt Costco. Gas sales were "slightly negative year-over-year as a result of very tough comparisons in terms of price and gallons sold last September," Bob Nelson, vice president of finance, said on a recorded call.
Fred's Inc. also pointed to the "extraordinary" events that made last year's inflated sales difficult to mount. The discounter's same-store sales climbed 5%, just shy of the 5.5% estimate at Thomson Financial.
At Target Corp., however, the picture was much brighter. Target said comparable-store sales climbed 6.7% -- better than the 5% rise forecast - and raised its third-quarter profit projection as well, though it didn't indicate by how much.
"Our sales in September were well above our expectations, driven in part by favorable weather," said Chief Executive Bob Ulrich. But "better-than-expected performance in our retail operations and the ongoing strength of our credit card operations," is behind his belief that Target will "produce third-quarter earnings per share above the current median (Thomson Financial) estimate of 53 cents."
