Retail sales hurt by gas prices, hurricanes

Thursday, Oct. 7, 2004 | 9:22 a.m.

BLOOMBERG NEWS

Sales growth at U.S. retailers slowed for a third month in September as higher gasoline prices cut into spending at chains including Wal-Mart Stores Inc. and three hurricanes disrupted department-store business in the Southeast.

Sales at U.S. stores open at least a year rose 2.7 percent nationwide, the smallest gain in 15 months, according to the New York-based International Council of Shopping Centers. Wal-Mart, the world's largest retailer, said sales rose 2.4 percent and forecast a 2 percent to 4 percent increase for October.

A 13 percent rise in gas prices from a year earlier crimped spending at lower-priced chains. Sales increased 2 percent at J.C. Penney Co. and were flat at Federated Department Stores Inc. as hurricanes Frances, Ivan and Jeanne forced closings in Florida, the companies said. Retailers also had a tough comparison with September 2003, when federal tax rebates fueled back-to-school sales.

"The consumer is not in great shape. Confidence is weak and getting worse," said Larry Jones, who helps manage about $2.4 billion in assets at Durham, N.C.-based NCM Capital Management Group, including Wal-Mart shares.

U.S. consumer confidence fell for a second straight month in September on concern about rising energy prices and slower job growth. The Conference Board last week reported its index fell to 98.6 percent from 98.7 percent in August, when same-store sales rose at the slowest pace in 17 months.

Sales at Target Corp climbed 5.6 percent, beating the company's forecast for a gain of 2 percent to 4 percent. They rose 7.2 percent a year earlier. Target said leading categories were sporting goods, entertainment, pharmacy and electronics. Locations in the West outperformed other regions.

Upscale merchant Nordstrom Inc. reported a 6.2 percent increase, lower than its 7.7 percent gain a year earlier and the 7.2 percent increase in August.

At Sears, Roebuck and Co., the largest U.S. department-store chain, sales fell 3.2 percent.

"There clearly are some pretty dismal numbers and some pretty nice numbers too -- it's mixed," said Michael Niemira, the shopping-center group's chief economist. "The broad story though is one of a sluggish pace that kicked in back in June. We really haven't kicked out of that."

The August through September back-to-school season, when merchants get about one-sixth of revenue, is the second-biggest selling period after Thanksgiving to Christmas. A slowdown in consumer spending, which accounts for about two-thirds of U.S. economic activity, may signal a decline in economic growth.

Shares of Minneapolis-based Target rose 73 cents to $47.83 at 9:39 a.m. in New York Stock Exchange composite trading. Shares of Sears, based in Hoffman Estates, Ill., rose $1.05 to $40.32. Wal-Mart shares fell 1 cent to $53.97.

J.C. Penney reported an increase of 2 percent after the hurricanes cut sales by as much as 2 percentage points. The company said it expects sales to be flat or increase in the "low single digits" in October.

Federated, the owner of Macy's and Bloomingdale's, said about $30 million in sales were lost to closings. October sales are forecast to rise 2 percent to 3 percent, which would result in "relatively flat" sales for the third quarter, said the company, which cut its profit forecast by about 6 cents a share in September because of the storms.

AnnTaylor Stores Corp., a women's clothing chain, cut its third-quarter forecast to a range of 28 cents to 32 cents from an earlier estimate of 48 cents to 50 cents, citing sluggish sales of sweaters and pants. Same-store sales rose 1.4 percent.

Shares of Plano, Texas-based J.C. Penney rose $1.27 to $37.33 at 9:41 a.m. Ann Taylor shares fell $1.77 to $21.78.

The end of the back-to-school shopping season last month wasn't as brisk as hoped, said Swampscott, Massachusetts-based Ken Perkins of RetailMetrics LLC, which tracks retail sales.

"It's probably best characterized as being lukewarm," Perkins said. "It wasn't on fire by any means."

"In general there's an improvement from August, which clearly was a washout, but it won't be a powerful recovery due to the weather," said Dan Popowics, who helps manage $22 billion in assets at Cincinnati-based Fifth Third Asset Management.