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.

Also in the basket:

Costco quarterly profit rises

August pending home sales jump

Car makers seen betting on electric vehicles

(Photo: Reuters)

A hot Manhattan club on a Saturday night? No, it’s the launch party for Fabulosity!

On Tuesday night, JC Penney didn’t let the difficult retail environment get it down.

The mid-priced department store operator threw a raucous party to celebrate the introduction of Fabulosity — the new sportswear line designed by former runway model Kimora Lee Simmons that it is introducing in its stores in time for the back-to-school shopping season.

At Hiro, a club in Manhattan’s trendy Meatpacking district, the lighting was low, the music was loud and the drinks were free. The tightly packed crowd danced to music and clicked pictures of themselves while waiting for Simmons to arrive and introduce her new line with a fashion show.

When the lights went dark around 9:15 pm, signaling the start of the show, Ken Hicks, Penney’s president, came on the runway to welcome the crowd and say how the retailer was excited to be working with Simmons — a great “inspiration” for the hip-hop inspired clothing line.

While the audience hooted, hollered and cheered, Simmons was the one who mentioned the difficult conditions shoppers are facing.

“I really demand that all my divas look fabulous,” she told the audience, but she added that shoppers should not have to spend their last dime to look that way.

The fashion show then got underway with a pounding performance by a drum band followed by models strutting their stuff on the catwalk.

The Fabulosity line features knit tops, high-waisted jeans, hoodies and a healthy dose of gold accessories. The collection, meant to be fit among Penney’s “best” or highest priced tier, will range in price from $29 to $108.

When the show finished, gold and silver confetti burst from the ceiling, blanketing the room and making for slick walking conditions. The crowd then dusted itself off and headed toward the door, near Simmons’ entourage, eager to catch another glimpse of the star before heading off into the evening.

Now Penney just has to hope Middle America will be as eager to buy Simmons’ clothing line as Tuesday night’s crowd was to celebrate it.          

(Photos: Taken by Nicole Maestri at the launch party)

Check out all those billions of dollars in U.S. tax rebate checks failing to give June retail sales much of a boost.

The Commerce Department said on Tuesday that total sales at U.S. retailers rose a less-than-expected 0.1 percent in June.  Economists polled by Reuters had forecast total retail sales to rise 0.4 percent in June, following a 0.8 percent gain in May.

Part of the weaker-than-expected results were due to falling demand for cars. Auto and auto parts sales fell 3.3 percent in June — their worst month since February 2006.  But even excluding autos, retail sales rose 0.8 in June, which was below the consensus estimate of 1.0 percent. Excluding autos, building supplies and gasoline, retail sales rose 0.4 percent in June. 

Economists had expected government tax rebate checks to give a bigger boost to retail sales in June, despite the weak overall U.S. economy, as shoppers had excess cash to spend. But last week, major retail chains, like J.C. Penney,  Target and Gap, released their June sales results and many did not see a rebate boost. Penney said it might have received a “modest” sales lift from the checks but any benefit would be “short lived.”

So where did the billions of rebate cash go?

Well, Wal-Mart got a chunk. Its June U.S same-store sales rose at their highest level in years as traffic in its stores jumped. The retailer had offered to cash tax rebate checks for free.

Surging gasoline prices likely gobbled up an even bigger chuck of the rebate dollars. The Commerce Department said gasoline station sales rose 4.6 percent in June as motorists faced higher prices at the pump. Over the past year, gasoline station sales have jumped 24.5 percent to nearly $46 billion last month, on a seasonally adjusted basis.

Charles Grom, a retail analyst with JP Morgan, estimates that every 1 cent increase at the pump, translates into $1.4 billion of lost consumer spending power. “Therefore, the (roughly) $1.00 jump in retail gas year-over-year should more than offset the $106 billion stimulus package,” he wrote in a note last week.

Also in the basket:

Newell Rubbermaid to exit certain product lines

Kimberly-Clark cuts year outlook, says profit fell

(Photo: Reuters)

What does gas at $4.50 a gallon mean for some mall-based department stores?

A downgrade by Goldman Sachs.

Goldman sharply raised its forecast for oil prices in the second half of this year, saying it expects U.S. crude to average $141 a barrel, up from a previous projection of $107. Goldman also forecasts prices will rise further next year to average $148.

That is not good news for retailers.

“Higher energy spending in the second half is likely setting the stage for a more challenging backdrop for consumer discretionary sectors, particularly for the department store stocks,” Goldman noted.

Goldman downgraded JC Penney and Nordstrom to ”neutral” from “buy.” It swapped its conviction list “buy” designation on Kohl’s with Wal-Mart. It upgraded off-price retailer TJX to “buy” from “neutral.”

Goldman also cut its second half same-store sales estimates for JC Penney, Kohl’s, Nordstrom and Macy’s.

“We believe companies will face an uphill battle against escalating energy prices offset by easier top-line compares and the anniversary of 2007’s extremely warm Fall season,” Goldman said about the second half of the year. ”In the end, we believe energy and constrained cash flow will win this tug-o-war causing same store sales to re-decelerate as the second half progresses.”
 
(Photo: Reuters) 

Check out the 50 percent drop in quarterly profit at JC Penney.

The mid-tier department store operator had warned in late March that its first-quarter profits would be hammered after a drop in store traffic and dismal Easter sales forced it to cut prices to clear out unsold merchandise.

Penney shoppers can expect more price cuts on future visits to the retailer. 

The department store operator said it is now trying to get inventory in its stores to better match the weak sales environment, meaning it will roll out more promotions and cut future merchandise orders.

Based on its forecast, Penney is expecting profits to decline yet again in its second quarter.

It forecast earnings per share of 38 cents–a dramatic drop from the 78 cents per share of earnings from continuing operations it reported a year ago.

Also in the basket:

Tiffany ups payout, sees 1st-qtr topping estimates

Tyson sees less, but more expensive, chicken

Blockbuster swings to profit in first quarter 

(Photo: Reuters)

JC Penney held its two-day analyst meeting in New York City this year, kicking off with a dinner and presentation by Chief Executive Myron “Mike” Ullman on Tuesday night.

The big news out of the meeting was that Penney’s time frame for its long-range growth plan has been stretched out due to the rough retail environment, and the retailer may further cut back on new store openings.

But there were some off-beat sites, sounds and observations from the meeting to make you feel like you were there (well … almost).

** After Ullman gave his speech on Tuesday night, he began to inform the crowd of the detailed logistics for how the analyst day would unfold on Wednesday, including telling them there would be boxed lunches on the bus that would take them to a store tour in Paramus, NJ. He then interrupted himself, joking that somebody else should be providing all the details. But upon further reflection he said: “I don’t know who it is who is going to tell you that– we probably eliminated that position.” The quip generated laughter from the crowd.
 
** Penney handed out a binder Wednesday morning filled with copies of the slide presentations that its management would be giving that morning. But to force impatient analysts (and reporters) to listen to all of those presentations, it omitted copies of the final key presentation — that of Chief Financial Officer Bob Cavanaugh. Penney knew that if it put copies of his slides in the binder, Wall Street analysts (and, well, us) would have dashed out of the room and rushed off to update their research notes (or file stories) – missing presentations on marketing, merchandising and customer satisfaction.

The tactic worked — the room remained packed all morning and fell silent when Cavanaugh finally came to the stage to give his presentation at the end of the meeting.  

** It was a reversal of fortune at the packed meeting on Wednesday – for once, the line to use the men’s room was longer than the line to use the women’s room during bathroom breaks.

(Photo: Reuters) 

Check out the bridge, the elongation and the unpredictability at the J.C. Penney analyst meeting.
 
CEO Mike Ullman told analysts that he will not be providing annual financial guidance at this time because the department store operator does not have enough visibility.
 
On Tuesday he highlighted how uncertain the retail environment was.
 
 ”I’ve been in the business 39 years. I don’t think I’ve ever seen an environment that was as unpredictable as the current environment,” Ullman said.
 
The department store chain has been hit as its middle-income customers contend with higher food and energy costs, a deteriorating housing market and a credit crunch.
 
Ullman said the time frame for the company’s five-year growth plan has probably been “elongated” and that the company  now has a “bridge” plan that includes moderating store openings and curbing the amount of inventory it keeps in stores.
 
Weakness in the retail industry has had one beneficial effect for consumers, though. Inflation at the consumer level rose less than expect due to falling apparel prices. Clothing retailers have been cutting prices to try to attract customers.
 
Also in the basket:
 
Coca-Cola profits  beat estimates

(Photo: Reuters)