US retailers struggle as consumers seek bargains
Economic downturn and threat of war hit sales
February 7 2003
Many US retailers are feeling the pinch as consumers cut back on spending in the face of an uncertain US economy and the likelihood of war with Iraq.
Among many US retailers announcing their January results, industry leader Wal-Mary reported that its like-for-like sales had fallen below forecasts, at 2.3 per cent compared to analyst expecation of around 3 per cent.
The department store sector also had problems, with Federated Department Stores reporting a January like-for-like fall of 1.2 per cent, and Sears, Roebuck also suffering a sharp sales decline, warning that that first-quarter earnings will be well below projections due to lower income form credit sales.
JC Penney sales were down 3.8 per cent, while the Mervyn’s and Marshall Field’s department store chains operated by Target saw a 0.4 per cent fall in same-store sales, compared to forecasts of 0.1 per cent.
However, there were better performances from discounters. Discount department store chain Kohl’s saw like-for-likes rise by 5.5 per cent, while warehouse club operator CostCo reported an ncrease of 5 per cent.
The expansion of food sales by discounters including Wal-Mart and Target hit sales at Safeway, the third-largest US supermarket operator. The company said underlying income in the third quarter fell from $363.7m to $359.4m.
Gap bucked the trend, continuing its recovery with sales in the US chain up 7 per cent, and the international chain up 18 per cent. Its Banana Republic chain saw a sales increase of 11 per cent and the Old Navy division, which has a value clothing offer, saw a January sales increase of 27 per cent.
Michael P. Niemira, vice president of Bank of Tokyo-Mitsubishi told news agency Associated Press: “January was marginally better than the prior month. But we are still locked in the same perspective.” War with Iraq is a “near-term potential and it makes for an iffy environment. The big question is how will consumers react if there is a war?”
Sale in January were helped by discounts, with US retailer running with low products stocks and aiming to clear Christmas lines. A burst of cold weather in some areas helped clothing sales.
Kurt Barnard, president of Barnard’s Retail Trend Report, said: “Stores were effective in getting rid of the overhang of merchandise to the benefit of consumers who saw very low prices. Consumers are still willing to buy so long as the product is a real bargain. The economy continues to be sluggish, with productivity down and failure of hiring to take place. Unemployment remains a serious problem.”
