Shop Talk

Retailers, consumers and prices

Check Out Line: Retail earnings optimism

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cash.jpgCheck 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)

Check Out Line: April sales reports bring May worries

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sale1.jpgCheck out the warning signs sprinkled amid the April sales results.
 
A lot of retailers reported better-than-expected sales in April as improved weather in parts of the country helped convince consumers to buy new clothes.
 
In fact, 61 percent of retailers that have reported so far beat estimates, according to Thomson Reuters research. Discounters, department stores and teen apparel retailers were among those posting the biggest upside surprises.
 
But amid those results were some comments that could be cause for worry going forward.

For example, J.C. Penney reported a less-than-expected decline in April same-store sales, but said it sees a steeper drop in May. It also said those rebate checks consumers are getting will provide, at best, only a modest benefit for sales and that any boost will be short-lived.
 
Wal-Mart had a better-than-expected same-store sales increase in April, but  gave a tepid outlook for May. The discount retailer said consumers are trying to stretch their dollars by purchasing cheaper types of meats or trading down to pasta.
 
Adding to worries, Wal-Mart said the “paycheck cycle” is getting more obvious, meaning it is seeing a drop in sales at the end of the month, just before consumers get paid.
 
Elsewhere, Target reported weakness in areas hard hit by the mortgage meltdown, including Florida, Arizona and Nevada.
 
Gap same-store sales actually fell more than expected in April and the company said the economic environment remains “volatile.”
 
The market seems to have picked up on the negativity, as the Standard & Poor’s retail index is down almost 2 percent.
 
Also in the basket:
 
Best Buy enters Europe with Carphone retail deal
 
Search said to be on for new Kellwood CEO (WWD)
 
Sally Beauty profit tops view; shares jump 
 

Check Out Line: It’s tough for retailers to sell themselves

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sales.jpgCheck out a different weak market for retailers.
 
Not only are retailers having trouble selling merchandise, they are also having trouble selling themselves.
 
The days of the buyout boom, when the underlying value of real estate attracted buyers to retail assets is gone, analysts and bankers told Reuters.
 
But there could be value for some investors.
 
“These markets will also create opportunistic deals for people willing to dig deep, do some research and wait for a longer payout. The days of sprucing up an asset for a quick flip are over for now,” said one retail investment banker, who declined to be named.
 
“There’s a lot of folks looking, but not necessarily pulling the trigger,” the banker said.
 
 
Also in the basket:
 
Blockbuster’s Circuit City bid deemed Netflix boon
 
Retailers get stingy with data (N.Y. Times)
 
LVHM Bullish on U.S. (WWD)
 
Supervalu 4th-quarter profit rises, sales edge up

(Photo: Reuters)

Check Out Line: Mum on forecast at J.C. Penney

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bridge.jpgCheck 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)

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