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 Macy’s profit, or loss, depending on how you count.
 
The department store operator posted a $59 million loss in the first quarter, hurt by a drop in sales and the costs of restructuring.
 
So of course its stocks jumped.
 
Restructuring charges are seen by the investment community as “one-time items” and are generally disregarded when looking at how well a company did in any given quarter. 
 
So without ”one-time items” Macy’s posted a profit of 2 cents a share from continuing operations. That was better than the 2-cents-a-share loss that analysts expected.
 
Macy’s also affirmed its forecast for a profit of $1.85 to $2.15 a share for the year, possibly a sign that things at least are not getting worse for the company, which, like most department store operators, has been hurt by the slumping U.S. economy.
 
Of course, that forecast excludes “one-time” items.
 
Also in the basket:
 
Barney’s Socol quits, no clear successor (WWD)
 
Benetton Q1 profit, sales up, outlook confirmed

(Photo: Reuters)

Check out things looking a little better in retail?
 
Ann Taylor raised its forecast for first-quarter earnings, citing improved results at its LOFT chain and stronger expense control.
 
This comes a few days after many retailers posted better-than-expected sales in April and could mark the start of a trend.
 
Goldman Sachs said the better April could lead to modest first-quarter earnings beats.
 
“This will be particularly evident across the department store sub sector as most management teams reduced their earnings outlook post March results, which fell short of plan. Kohl’s has already kick started this trend stating EPS would ‘exceed’ previous 40 cents to 42 cents guidance. We suspect J.C. Penney will follow suit, beating management’s 50-cent forecast … given high end of plan sales,” Goldman said in a research note.
 
Retail earnings get going in earnest this week with reports from Wal-Mart, Macy’s, J.C. Penney and others.
 
Also in the basket:
 
April retail sales barely budged: SpendingPulse
  
Luxury brands Prada, Ferragamo risk competing IPOs

(Photo: Reuters)