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Editorial See other Editorial Articles Title: Stores' Weak Sales Signal Consumers, Economy In Trouble Stores' Weak Sales Signal Consumers, Economy In Trouble By MARILYN MUCH Cash-strapped consumers tightened their purse strings last month as Wal-Mart (WMT) and other retailers released anemic sales figures Thursday. January sales at stores open at least a year rose just 0.2% from January 2007, slightly shy of 0.7% views, said Ken Perkins, president of Retail Metrics. Though 57% beat forecasts, expectations were very low, said Perkins. Only 1% met views, while 42% missed. Shares of almost all retailers rallied Thursday on relief that results weren't worse. The S&P Retail index jumped 3.7%. January's anemic sales still show consumers continuing to struggle with high food and gas prices, tighter credit, and housing woes. Worse, employers in January cut payrolls for the first time in four years. New and continuing claims for jobless benefits are at or near 2-year highs. The economic head winds are taking their toll on consumers. "We're seeing all the factors that drive cash flow to the household sector deteriorate," said Carl Steidtmann, chief economist at Deloitte Research. "If they don't have the cash to spend, they can't go out and spend." The most telling sign of consumer weakness was Wal-Mart's large shortfall, Perkins said. The world's biggest retailer's same-store sales rose 0.5% vs. a forecast of 2%. "That was a big miss off a company's guided plan," Perkins said. Rival Target (TGT) also missed goals. Perkins says the miss suggests Wal-Mart's core low-income and mid-income customer is feeling the pain of all the economic head winds, particularly higher food and energy prices. Wal-Mart said gift card redemptions were lackluster, with a large portion being spent on food. But it wasn't just lower-income Americans feeling the pinch. Nordstrom's (JWN) same-store sales fell 6.6% vs. a year earlier. Wall Street expected the upscale department store chain to post a 0.4% decline. Last month's same-store sales growth marked the weakest January since 1970, said Michael Nie-mira, chief economist at the International Council of Shopping Centers. By his calculations January same-store sales grew 0.5% vs. 2007. "Clearly, the report portrays weak demand from the consumer," Nie-mira said. "It certainly reflects a very cautious consumer that isn't buying discretionary goods to the same extent they were a year or two ago." He says the spending that is occurring is more for items like food and other staples and consumable goods. Consumers also are "downscaling" purchases, he said. Among January's big winners were wholesale clubs.Costco's (BJ) same-store sales rose 7%, beating views. B.J.'s WholesaleClub's (BJ) same-store sales were up 7.8%, also above forecasts. Another big winner was teen chain Buckle (BKE) with an 19.1% rise in same-store sales. Same-store sales at J.C. Penney (JCP) and Gap (GPS) both fell less than expected. Niemira says the pace of same-store sales growth has been slowing. For the 2007 fiscal year, the average monthly same-store sales growth was 2.1% vs. 3.6% in 2006. Since last September that pace has slowed to about 1.5%. He expects February same-store sales will rise only about 1% from a year ago — or about 1.5% on the high side. Wal-Mart expects comps to be flat to up 2% in February. A big worry detracting from consumer purchasing power is concerns about the economy, Niemira said. "Are we in a recession? Are we going into one? Are we going to see more job cuts?" Niemira asked. "All these questions are weighing heavily on the consumer and the uncertainty is bad for spending." Niemira says we currently are in a "de facto" recession, adding we need about six months before we're technically in a recession. Steidtmann sees it differently: "I don't think there's any question we're in a recession given the weakness in consumer spending. The unemployment data and the latest ISM service survey clearly point to the economy being in a mild recession." Not all is doom and gloom, Perkins said. Congress was set to pass a fiscal stimulus package late Thursday, with checks going out to consumers this spring. Also, the Fed's aggressive rate cuts should put more cash in consumers' pockets, Perkins said. But if the job market deteriorates it will completely offset any of these benefits, he said. Copyright © Copyright 2008 Investor's Business Daily. Displayed by permission. All rights reserved. You may forward this article or get additional permissions by typing http://license.icopyright.net/3.7543?icx_id=20080207featureleft into any web browser. Investor's Business Daily Inc. and Investor's Business Daily logos are registered trademarks of Investor's Business Daily Inc..
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#2. To: tom007 (#0)
Give me a f****** break...how does their BS "aggressive rate cuts" put more cash in the pockets of the middle class??? Lower interest rates...I'm awash in cash! Happy, happy; joy, joy!
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