October 6, 2005

Retailers slog through storm-hit Sept

By Emily Kaiser

CHICAGO (Reuters) - Chain stores reported on Thursday that
September sales were resilient in the face of Hurricanes
Katrina and Rita and high gas prices, although sales came at a
cost as retailers slashed prices to maintain demand, putting
pressure on profits.

Chains that sell gasoline, including Wal-Mart Stores Inc.
and Costco Wholesale Corp., posted better-than-expected sales
growth. But several apparel retailers and department stores
missed forecasts, and some trimmed profit forecasts as heavy
markdowns eroded margins.

Overall, analysts are looking for a 3.6-percent gain in
September sales at stores open at least a year -- a key retail
measure known as same-store sales, according to research firm
Retail Metrics. That would be up from last year's 2.3 percent
increase but down from a 3.8 percent gain in August.

Wal-Mart kept its profit forecast for the current fiscal
third quarter, but said the hurricanes cut 1 cent per share
from earnings in the period.

But retailers including Talbots Inc., TJX Cos. Inc.,
AnnTaylor Stores Corp. and New York & Co. Inc. all lowered
profit forecasts, while Federated Department Stores Inc. and
Kohl's Corp. were among the chains posting disappointing sales.

Slumping consumer confidence was a key concern as retailers
gear up for the vital holiday shopping season. September kicks
off the fall shopping season and is considered a good indicator
of demand during the holidays -- the biggest sales and profit

Talbots, which cut its full-year profit forecast on weak
September sales, said its annual survey found consumers
increasingly worried about high fuel prices and the economy,
and those concerns are making them more conservative in their
shopping habits.

Analysts widely expect holiday sales growth to slow from
last year's torrid pace as hefty gasoline and home heating
bills cut into household budgets.

Britt Beemer, head of America's Research Group, which
tracks consumer trends, said Labor Day sales in September are
an accurate predictor of holiday demand nine times out of 10,
and this year's sales were disappointing.

Beemer said he surveyed 1,000 people two weeks before Labor
Day -- which was also before Hurricane Katrina -- and some 38
percent said they intended to go shopping over the holiday
weekend. He polled those same people again after Labor Day
weekend and found that only 28 percent actually shopped.

"If things don't change, I still think there is a
possibility that we could have the first negative Christmas
sales season in two decades," Beemer said, referring to
same-store sales.


Wal-Mart, the world's biggest retailer, said September
same-store sales rose 3.8 percent, toward the high end of its

But the results were boosted by sales of gasoline at its
Sam's Club warehouse stores, and the retailer was quick to
point out that sales would have been up a more modest 3.2
percent without the lift from gasoline sales.

Costco also said steep oil prices boosted September
same-store sales, which were up 11 percent from a year earlier.
Analysts had expected only a 6.7 percent increase, according to
estimates compiled by Reuters.

Costco said U.S. same-store sales jumped 10 percent, but
the gain would have been just 8 percent if not for a steep 47
percent year-over-year jump in gasoline prices.

Target Corp. reported a better-than-expected 5.6 percent
September same-store sales increase and maintained its profit
forecast for the rest of the year.

Federated reported a 1.3 percent September same-store sales
increase, below its expectations for a 2 percent to 3 percent
increase. The retailer blamed lost sales from stores closed due
to the hurricanes, as well as reduced spending because of
higher gas prices and weakening consumer confidence.

Apparel chains were among the laggards, with several
companies noting a drop in demand during the last week in the

Talbots said its same-store sales fell 5.1 percent, well
below Wall Street forecasts for a 2.5 percent increase. New
York & Co. said its September same-store sales fell 0.4
percent, which was actually a smaller decline than Wall Street
had expected. But the retailer lowered its full-year profit
forecast, noting that margins suffered because of promotions.