March 5, 2009

February report is in, and it says Walmart and Costco are doing five percent better and everybody else is going in the tank.

Retail Sales Slide Further, Except at Wal-Mart

Published: March 5, 2009

February was another terrible month for the nation’s retailers, but the numbers they reported on Thursday were slightly less awful than in previous months.

Wal-Mart Stores, the nation’s largest retailer, exceeded analysts’ expectations, once again underscoring that consumers are opening their wallets only to buy necessities. At stores open at least a year, a barometer of retail heath known as same-store sales, Wal-Mart had a 5.1 percent sales increase, compared with a 2.7 percent increase for the period a year ago.

The company said its strong sales were driven by its grocery and health-and-wellness categories, and noted that more customers are streaming through its doors.

“We believe falling gas prices significantly boosted household disposable income in February and therefore allowed for both more trips and more spending towards discretionary categories,” Wal-Mart said in announcing its results.

On the heels of that news, Wal-Mart said Thursday that it would increase its annual dividend to $1.09 a share, a 15 percent increase from the 95 cents a share paid during fiscal year 2009. “The strength of our operations and the resulting strong financial position allow us to increase our dividend payout to shareholders again this year,” Mike Duke, Wal-Mart’s president and chief executive officer, said in a statement.

Thanks to Wal-Mart, the retail industry had a 0.7 percent sales gain in February compared with the period a year ago, according to Retail Metrics, a research firm. Without Wal-Mart, overall retail sales would have fallen 4.1 percent. As Ken Perkins, president of Retail Metrics, noted in a report Thursday morning, “it’s still ugly,” but Wal-Mart “dressed up” the month nicely. Thomson Reuters had slightly different numbers, showing that overall industry sales increased 0.3 percent, and declined 4.7 percent not including Wal-Mart.

Whatever the overall sales increase, it was less than a percent — but nonetheless welcome news for an industry that has not posted a positive sales figure since September. Michael P. Niemira, chief economist and director of research for the International Council of Shopping Centers, an industry group, said in a statement Thursday that “the last four months show an increasingly less negative performance for the industry.” The council said same-store sales for some 35 chains it looks at were down 0.1 percent in February compared with a year ago.

Retailers and industry analysts said that in February stores got a lift from pent-up consumer demand, better weather and some new spring merchandise. A couple of chains posted sales increases that were more than twice what analysts expected.

Still, most stores suffered sales declines. Analysts pointed out that their expectations for February sales had been low, and cautioned against reading too much into the bump in sales.

“Sales trends are not as bad as they were in January but they’re kind of at a level where they were in October, November, December,” said Jeff Black, a director at BarclaysCapital Equity Research, “so we haven’t improved off of that base.” The worst sales declines came from Abercrombie & Fitch, the teenage-apparel retailer, which posted a whopping 30 percent drop.

Indeed, clothing retailers continue to hurt the most, especially at the high end. Same-store sales sank 26 percent at Saks, 24.2 percent at Neiman Marcus and 15.4 percent atNordstrom, compared with a year ago.

Other department and big box stores also had declines, including Dillard’s (down 13 percent), Stein Mart (down 12.2 percent), J. C. Penney (down 8.8 percent), and Macy’sand Bon-Ton Stores (both down 8.5 percent).

Sales fell at the mall too, dropping 13.4 percent at Zumiez, 12 percent at Gap, 7 percent at both American Eagle Outfitters and Limited Brands, and 6.6 percent at Wet Seal.

Over all, discount stores were the only retail categories that had sales increases in February, according to analysts surveyed by Thomson Reuters.

Same-store sales at BJ’s Wholesale Club increased 8.2 percent, not including fuel. The company said customer traffic increased about 7 percent and the average transaction amount ticked up about 1 percent. Sales of food increased 10 percent.

Sales at Costco were up 5 percent, not including fuel. Ross Stores, the discount clothing chain, had a 1 percent sales increase compared with the period a year ago. Michael Balmuth, the company’s president and chief executive, said in a news release that Ross’ “name-brand bargains” drove its better than expected sales.

Not every discount chain had sales growth, though the declines in this category were far less than in others. Sales at TJX, which owns TJMaxx stores, were flat. At Kohl’s, sales fell 1.6 percent. Children’s Place, which sells affordable children’s clothing, had a 3 percent decline. At Target, sales continued to lag behind other discount chains, falling 4.1 percent. Gregg Steinhafel, the company’s president and chief executive, said in a statement that Target’s results “continue to reflect the significant economic challenges facing our guests.”

As in previous months, a few mall retailers that cater to teenagers posted impressive double-digit increases. In fact, AĆ©ropostale said it enjoyed record sales in February, reporting an 11 percent increase. Same-store sales at Buckle increased 21 percent. Sales at the niche retailer Hot Topic jumped 10.8 percent, much more than analysts expected.

The International Council of Shopping Centers expects March same-store sales to be flat or decline 1 percent on a year-over-year basis.

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