Check out the falling same-store sales at Costco.
 
Okay, October was a pretty rancid month for most retailers, and most did worse than Costco.
 
But the warehouse club operator had a 1 pct same-store sales decline in October that was its worst performance since Thomson Reuters began tracking such data for Costco in 1997.
 
Warehouse clubs had been holding in with cash-strapped consumers looking to save money with bulk purchases of toilet paper, food and other essential items.
 
But consumers have really cut back on the nonessentials, so sales of items like computers, toys and jewelry suffered.
 
Wonder how the 1,000-count bottles of aspirin are selling as consumers cope with the economic headache.

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(Reuters photo)

Check out the October monthly sales results due this week.

Think of an adjective for “bad” and that pretty much describes Wall Street analysts’ current view for how the month shaped up. 

Retail chains, like Wal-Mart, Costco and J.C. Penney, will release October results on Wednesday and Thursday, and Thomson Reuters is forecasting a decline of 0.1 percent. 

“If the index actually comes in at -0.1 percent, this would be the weakest same-store sales result ever registered since Thomson Reuters began collecting estimates in 2000,” Thomson Reuters said.

Department stores and specialty retailers are expected to be the worst hit, mitigated only slightly by shoppers seeking bargains at discount chains or drugstores. 

“Most Americans have been caught like deer in headlights, not knowing what financial or economic disaster is around the corner,” Susquehanna Financial Group analyst Thomas Filandro wrote in a note. “More and more consumers are broadly pulling back, leaving the retailer with little choice other than to promote.” 

One positive for retailers in October was gas prices. The average price for a gallon of regular gasoline, which was $3.63 at the end of September, fell to $2.65 by the end of October, according to the Energy Information Administration.

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(Photo: Reuters)

Wal-Mart is betting $10 and 10 weeks will draw new members to its Sam’s Club warehouses.

Sam’s Club and Costco work as membership clubs. Shoppers pay an annual fee that allows them to shop in the warehouses and get discounts on everything from diamond rings and big screen TVs, to bulk-sized packages of toilet paper or bottled water.

In the past year, the clubs have become popular with consumers and small businesses looking for ways to stretch their budgets as prices rise and paychecks shrink. But in this environment, cash-strapped customers may find the upfront fee a deterrent to joining the clubs if they are not already members.

Sam’s offers a variety of memberships, including a $40 one for individuals and a $35 membership for business customers that allows them to shop during special “business only” hours.

Sam’s Club has talked about wanting to improve its membership base, and in its latest push, it is now offering a $10 membership good for 10 weeks to families and businesses that are not currently members.

“With a temporary 10 week membership we’ll be able to give those who sign up a good chance to see what we can do for them everyday, and through the holidays,” said Mike Turner, vice president of membership at Sam’s Club, in a statement.

In July, Sam’s Club offered a special deal to attract college students. With a valid college identification card and college email address, students were able to buy a year-long membership for $40 and receive a $15 gift card.

(Photo: Reuters)

Check out disappointing September retail sales

Many U.S. retailers posted worse-than-expected sales at stores open at least a year on Wednesday, and some cut their profit outlooks and said things won’t improve anytime soon as consumers remain shaken by the financial crisis, job worries and the housing slump.

Discounter Wal-Mart Stores and warehouse clubs managed the best sales performances in September as shoppers sought bargains on necessities. Wal-Mart, the world’s biggest retailer, stood by its third quarter earnings forecast.

Apparel retailers and department stores were particularly hard hit, and even luxury chain Neiman Marcus said consumer demand will stay weak for an extended period. Kohl’s, J.C. Penney and Nordstrom cut quarterly profit forecasts.

The results could further subdue expectations for the 2008 holiday season, expected to be one of the weakest in recent years.

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(Photo: Reuters)

Last month, in a poll conducted by SheSpeaks, a women’s insights marketing firm, almost 50 percent of respondents said they would spend less this holiday. That was up from nearly 30 percent who answered the same way last year.

In a new poll, SheSpeaks asks where shoppers intend to spend fewer dollars. Here are the results from the updated poll:

If you are planning to curb your spending, where will you be spending less money? 
1 - Department Store (37.64%) 
2 - Mass Merchandiser (Wal-Mart, Kmart, Target)   (23.62%) 
3 - Big Box Retailer (Home Depot, Staples, Toys R Us, etc.) (16.85%) 
4 - Grocery Store  (11.50%) 
5 - Club Store (Costco, Sam’s, etc.)  (3.94%) 
6 - Discount Store (TJ Maxx, Filene’s, etc.) (4.41%) 
7 - Drug Store  (2.05%) 

Aliza Freud, founder of SheSpeaks, said she was surprised by the high percent of respondents who said they would cut their spending at mass merchants like Wal-Mart and Target. Wal-Mart’s results have been outpacing rivals in recent months as consumers seek out its low prices.

But Freud said: “People are feeling like they’re not getting the deals that they really expected to get there.” She said one reason for this feeling may be the lack of coupons that these retailers distribute. Instead of relying on a retailers’ promise that they offer low prices, Freud said respondents indicated that they prefer shopping with coupons these days to feel as if they are getting the lowest prices possible.

“We think coupons are a huge opportunity right now for retailers,” Freud said.

(Photo: Reuters)

Late last month, Costco warned its quarterly profit would miss Wall Street estimates as soaring costs and inflationary pressures ate into its margins.

While the cost of the goods it sells was going up, the No 1 U.S. warehouse club operator said it was delaying passing along price increases to shoppers in order to boost its sales and appeal to cash-strapped consumers.

“It is times like this, painful as it may be, that holding off on price-increasing certain key items, by even a few weeks, we believe helps and strengthens our business for the longer term,” Costco Chief Financial Officer Richard Galanti said at the time.

BJ’s Wholesale, the No 3 U.S. warehouse club operator, said on Wednesday that it is  keeping an eye on what its competitors are doing when it comes to marking up their prices.

“Inflation is a huge challenge for all retailers as we try to manage pricing in such a way that we recoup our costs while continuing to deliver value,” said BJ’s CEO Herb Zarkin on a call with analysts. “Our overall goal is to maintain our margin rate but it is quite a balancing act.”

But one thing is clear — BJ’s does not intend to undermine its profits by selling goods below cost.

“No rational retailer can accept these kind of increases and expect to make a profit. It’s just not going to work,” he said.

Prices for flour, rice, cooking oils, paper towels, household cleaners, and health care items have soared this year, driven higher the cost increases in energy, raw materials, transportation and labor, BJ’s said.

But general merchandise — which includes jewelry, electronics, tires, books, furniture and toys —  is getting in on the act as well.

“Overall, we are experiencing inflation in most of the general merchandise categories that come from overseas and those items are just hitting the floor,” said President Laura Sen.

What might that mean heading into the holidays for retailers that sell general merchandise, which tends to be more discretionary in nature and the type of purchases that consumers are overlooking these days?

“The promotional environment is going to be brutal,” Sen said.

(Photos: Reuters)

Check out the earnings warning from Costco.
 
Warehouse clubs were supposed to be benefiting from the weak economy and soaring gas prices as consumers, hit by rising food costs and gasoline prices, looked to save money.
 
But it turns out that benefit might only be on the sales side, not the bottom line.
 
Costco said Wednesday that quarterly profit would be well below analysts’ estimates.
 
“Factors negatively affecting our fourth-quarter earnings outlook arise largely from inflation, particularly as to energy costs,” Chief Financial Officer Richard Galanti said in a statement.
 
The company is making less money on its gasoline operations and margins on its merchandise were also down as it tried to maintain prices that would attract customers, Costco said.
 
Warehouse clubs and discounters had been some of the better retail sales performers in recent months.

So is Costco’s warning specific to the company, or is the lower-priced part of the retail spectrum taking a hit now, too?
 
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(Photo: Reuters)

Check out quarterly results from retail companies, including Sears, Costco, Heinz and Big Lots.

Markdowns? No good for Sears. The company, controlled by Eddie Lampert, posted a surprise loss, hurt by discounts and floundering sales at its Kmart and namesake stores.  Immediate respite is not in sight, Sears said, as consumers juggle higher gasoline and food prices.

But discounts on the right products can mean good fortunes. Costco, for instance, reported a 32-percent jump in profit, thanks to consumers who sought deals on items like food and gasoline. Big Lots, which sells excess inventory, also posted higher profit, thanks to strong sales at stores open at least two years.

Ketchup-maker Heinz benefited from price increases and a weak U.S. dollar and is now hoping for higher annual earnings fueled by growth in emerging markets and health and wellness items.

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Food costs have been soaring worldwide, spurred by increased demand in emerging markets like China and India; competition with biofuels; high oil prices and market speculation. 

That situation has sparked food riots in several African countries, Indonesia, and Haiti. United Nations Secretary-General Ban Ki-moon has warned that higher food prices could hurt global growth and security.

But the effect of rising prices took a surprising turn this week– at least a surprising turn by U.S. standards — when it comes to sales of rice.

Rice prices in particular have surged this year as exporters curb supplies. Trade bans on rice have been put in place by India, the world’s second largest exporter in 2007, and Vietnam, the third biggest, in hopes of cooling domestic prices.

Worried that rice prices may soar beyond affordable levels and worried that shortages abroad would be replicated at home, U.S. shoppers began buying up large quantities of rice.

The move caused warehouse club operators Costco and Sam’s Club, which sell large bags of the staple item and have lots of small restaurant owners as their customers, to limits sales of rice.

Wal-Mart’s Sam’s Club warehouse chain said it was limiting sales of 20-pound (9 kg), bulk bags of Jasmine, Basmati, and long grain white rice to four bags per customer per visit, at all of its locations. It cited “recent supply and demand trends.”

Costco’s CEO Jim Sinegal said he thought the sudden surge in buying was being triggered by constant media reports highlighting food shortages and rising prices. He said the warehouse club was trying not to limits sales of the items.

“If it’s a Chinese restaurant who buys from us all the time we can’t tell them, ‘Why don’t you try french fries this week?” he said, “They need rice.”

If it does run out of supply, Sinegal said Costco is usually back in stock by the next day.

“We don’t want to create a panic situation,” he said.

Tell us … Have you been stocking up on certain items amid rising prices?

(Reuters photo and graphic)