Retailers Beat Earnings Expectations
Retailers beat Wall Street's expectations left and right this morning when they released their closely watched "same-store sales" figures for September, the measure of revenue generated at stores open at least a year.
Leading the way among those announcing figures early were American Eagle Outfitters, with a 19 percent jump; Kohl's, enjoying a 16.3 percent surge; and Nordstrom, reporting a 13.4 percent increase.
But not sharing in the bounty was Wal-Mart, which saw sales edge up just 1.3 percent–at the low end of its forecast of 1 to 3 percent. Analysts noted that the world's largest retailer faced a tougher time than other chains beating last year's numbers, because in September 2005 it welcomed a surge of consumers replenishing their households after the hurricanes. But it was notable that Wal-Mart did not benefit more from falling gas prices this year, since it had long blamed its sluggish gains on the disproportionate impact that energy prices had on its working-class customers.
"It's probably true that Wal-Mart's customers are better off now that gas prices are falling," says Michael Niemira, chief economist of the International Council of Shopping Centers. "But it's not a one-to-one relationship" that benefits Wal-Mart.
On the other hand, analysts believe lower energy prices helped rival Target turn in a healthy 6.7 percent gain. Chief executive Bob Ulrich said another factor was "favorable weather": The relatively cool September helped sell fall merchandise throughout the industry. But New York retail analyst Dana Telsey says Target's branding efforts, associating its stores with popular designers, continues to help pull in a broad mix of customers from a variety of income levels.
Marketing was key for many retailers. At Kohl's, Telsey notes, "they have a concentrated program in the past few years to advertise those brands that are available only at Kohl's," such as Nike and Liz Claiborne. And at Federated Stores, which used September for a nationwide relaunch of the Macy's brand, sales were up 6.2 percent–exceeding the company's guidance of 3 to 5 percent. Analysts believe that Federated's advertising blitz also brought consumers into other stores in malls, for example, driving up sales at teen apparel seller American Eagle and children's outfitter Gymboree (up 20 percent). The Gap, however, continued to struggle, with a falloff of 3 percent despite an aggressive fall marketing push.
"Consumer spending, at the end of the day, is pretty decent–it's not booming, but it's not a bust," says Niemira. "It's somewhere in the middle range, and it's uneven by retailer."