Friday, September 3, 2004

Retail sales hit wilting August

Raises concerns consumer float may be sinking

By Randy Tucker
The Cincinnati Enquirer

Federated Department Stores reported disappointing August sales Thursday, blaming poor back-to-school demand, the devastating effects of Hurricane Charley in the southeast and a shift in the Labor Day holiday that will likely push more sales into September.

The Cincinnati-based parent of Bloomingdale's and Lazarus-Macy's said sales at stores open at least a year - considered the best indicator of a retailer's health because they exclude sales at new stores - fell by 2.4 percent.

Total sales for the four-week period that ended Aug. 28 fell 2.7 percent to $1.05 billion.

The company had expected sales for the month to be flat.

Federated wasn't alone in reporting lackluster sales.

Even Wal-Mart Stores Inc., the industry leader, suffered last month, turning in its weakest performance in 31/2 years. It managed a marginal gain of 0.5 percent in same-store sales. The discounter pared its third-quarter sales and profit forecast Thursday after the company and other retailers released their results.

The discouraging news came from nearly all retail sectors and raised concerns consumers who have helped prop up the economy with spending might now be contributing to its slowing.

The big exceptions were high-end stores whose customers were the first to benefit from the economic recovery and who haven't been as vulnerable to rising gas prices. And Best Buy Co. Inc. offered a solid sales outlook based on strong business from its digital TVs and such services as its 24-hour computer support task force.

In addition to weather and calendar issues, slow job growth and rising gas prices limited shopping trips and contributed to the slow foot traffic in August.

That killed a much-anticipated fast start to the back-to-school shopping season and has put pressure on retailers to shore up lost sales in September.

"Retailers are ready to put the summer behind them,'' said Tracy Mullin, CEO of the National Retail Federation, the nation's largest retail trade group. "Retailers' saving grace may be inventory levels, which have been kept under control and are helping stores focus on moving fall merchandise.''

Federated's gross margins have seen steady improvement on full-price selling and low inventory levels for most of the year. But the company can't continue to fall backward if it hopes to meet its same-store sales guidance of 1.5 percent to 3 percent growth in the second half of the year.

Shares in Federated closed at $44.45, up $1.34.

Other Ohio retailers also struggled in August and are faced with the same uphill battle.

New Albany, Ohio-based apparel retailer Abercrombie & Fitch said August comparable-store sales decreased 5 percent, compared with the four-week period ended August 30, 2003.

And Columbus-based Limited Brands suffered a 2 percent drop in same-store sales, worse than the 0.3 percent projected decline.

Nationwide, Federated rival May Department Stores saw its same-store sales slide 5.9 percent.

And Dillard's, another department-store competitor, saw sales fall 5 percent.

The Associated Press contributed


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