The nation’s retailers said they suffered a fourth consecutive month of steep sales declines in January, underscoring a broad and sustained shutdown in consumer spending.
“For the last 10 years people bought cars and refrigerators and TVs like they were going grocery shopping,” said Mike Moriarty, partner at A. T. Kearney, a management consulting service. “Now people are grocery shopping like they’re buying a car.”
Sales for the entire retail industry fell 1.6 percent last month compared with the same month a year ago, the International Council of Shopping Centers, an industry group, said Thursday. The research firm Retail Metrics put the industry decline at 1.8 percent and said that without Wal-Mart Stores, the nation’s largest retailer, sales would have fallen 5.6 percent.
January is always a slow period for stores, but nowadays big-box retailers and luxury chains are contending with paltry sales trends and profit margins that have been hurt by excessive discounting to attract consumers. Stores with weak balance sheets “are not going to make it through the summer,” said Claire Gruppo, managing director of Gruppo, Levey & Company, a New York investment bank.
On Thursday, Fortunoff, the nearly 90-year-old upscale home furnishings and jewelry chain, became the latest retailer to file for Chapter 11 bankruptcy protection.
Several chains that reported sales figures on Thursday beat low expectations, but most still turned in double-digit declines. Analysts were not surprised. As they had expected, the most successful stores were the ones selling quality and name-brand essentials at low prices.
“When there’s a need for product, whether that’s food, consumables, kid’s apparel — nondiscretionary items at a value and at a convenience — then the consumer is shopping,” said Matthew F. Katz, a managing director in the retailing practice of AlixPartners, a reorganization firm.
Wal-Mart, for instance, exceeded expectations. The retailer posted a 2.1 percent increase, not including fuel, at stores open at least a year, a barometer of retail health known as same-store sales.
“Our sales results were driven by a continuation of gains in customer traffic,” said Eduardo Castro-Wright, vice chairman of Wal-Mart.
Wal-Mart also said it would no longer offer monthly sales forecasts. Instead, it will offer guidance four times a year.
“We believe this guidance is a more appropriate measure for our investors,” said Tom Schoewe, Wal-Mart’s chief financial officer, “particularly in volatile times when consumer swings are more difficult to predict. This is more consistent with the long-term view we take on our business.”
Wal-Mart’s discount competitors also fared better than the rest of the industry. Sales at BJ’s Wholesale Club were up 7.6 percent, not including fuel, this January compared with last January. Sales were down 3.3 percent at Target and 2 percent at Costco but those figures were an improvement over the chains’ December sales figures.
The freeze in discretionary spending continues to weigh most heavily on department stores, especially luxury chains. Same-store sales fell at Neiman Marcus (down 24.4 percent), Saks (down 23.7 percent) and Nordstrom (down 11.4 percent).
Sales at lower-priced department stores also dropped: 16.4 percent at J. C. Penney, 13.4 percent at Kohl’s, 12 percent at Dillard’s, 8.2 percent at Bon-Ton Stores and 4.5 percent at Macy’s.
Business was hardly better elsewhere at the mall, where most retailers had double-digit declines, including Gap (down 23 percent), American Eagle Outfitters (down 22 percent), Abercrombie & Fitch (down 20 percent), Zumiez (down 14.8 percent), Wet Seal (down 14.7 percent), Children’s Place and Pacific Sunwear of California (both down 11 percent). Limited Brands was down a comparatively rosy 9 percent.
Some niche chains managed, however, to buck the trend.
Aéropostale, the affordable apparel retailer that has been on a roll lately, had an 11 percent sales increase in January. Another specialty retailer for teenagers, Buckle, had a 14.7 percent jump. Sales at Hot Topic, another mall chain store aimed at teenagers, were up 6 percent, mainly from selling gear inspired by the vampire romance film “Twilight.”
Still, the American consumer — grappling with rising unemployment, tight credit markets and falling stock portfolios — is not spending freely. The savings rate rose to 3.6 percent in December, up from 2.8 percent in November, after years in negative territory.
To stay alive, retailers are consolidating their operations, eliminating jobs and closing stores.
Last month, Fortunoff closed its Fifth Avenue store in Manhattan.
“The jewelry and home goods businesses have been hit particularly hard by the economic downturn,” Charles Chinni, Fortunoff’s president and chief executive, said in a statement on Thursday. “However, we are actively seeking a buyer for the business, and we will continue to do so in the Chapter 11 process.”
Fortunoff had already sought bankruptcy protection last year but was bought in March for $110 million (including $80 million in cash) by NRDC Equity Partners, the private equity firm that owns the Lord & Taylor department store chain.
NRDC had planned to put Fortunoff goods into every Lord & Taylor store and expand the number of Fortunoff’s regional outdoor furniture stores from 16 to more than 300. But that plan has been scrapped. Private equity firms, like everyone else, are hunkering down and spending as little as possible these days.
“What we all want to know is, ‘How long does this go on?’ ” asked Marie Driscoll, a retailing analyst with Standard & Poor’s Equity Research.
The International Council of Shopping Centers, the trade group, said sales for the retail industry would continue to decline, falling 1 to 2 percent in February. And the National Retail Federation, an industry group, sent a letter to the Senate, calling for national sales tax holidays.
The federation said in its letter that it was “extremely concerned” that the package of economic stimulus measures passed by the House last week was not enough to jump-start consumer spending.
“Long-term economic stimulus is critically important,” said Steve Pfister, the federation’s senior vice president, “but immediate economic stimulus is absolutely essential.”
Source : NYTimes
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic slowdown financial collapse world recession global recession layoff job cut]
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