Friday, May 11, 2007

Retail numbers nose dive

Market Watch - With 51 retailers reporting to Thomson Financial, 85% of them missed expectations for same-store sales, the industry's benchmark for growth measured by receipts rung up at stores open longer than a year.
Overall, the data showed a 1.8% decrease.
The International Council of Shopping Centers weighs its results differently and tallied an overall same-store sales drop of 2.3% to set the largest decline on record, which dates back to November 1970.
To be sure, by Niemira's own calculations the three-month trend is for a 2% increase in same-store sales, compared with last year's 4% gain in the same first months of the retail fiscal year. His May forecast is for a gain of 2% to 2.5%
Here is a roundup provided by Mish Shedlock
*Walmart posted a 4.6% decline rather than the 1.1% drop expected.
*Target's same-store sales dropped 6.1%.
*Gap stores' results were a big blow to investors, plunging 16%, more than double the minus 7.1% estimate at Thomson Financial.
*Banana Republic's sales were down 13% -- a big miss from the 1% decline expected.
*American Eagle was forecast to ring up a 1.3% gain in same-stores sales. Instead, the teen-wear retailer turned in an eye-popping 10% drop in comparable-store sales, blaming all the expected factors of weather, calendar shifts and comparisons.
*Pacific Sunwear of California same-store sales dropped 16.5%, far deeper than the minus 6.5% expected at Thomson Financial.
*Limited Brands Inc. parent of Limited, Express, Victoria's Secret, and Bath & Body Works reported that same-store sales fell 1% rather than the forecast 1% gain.
*Bebe Stores the trendy apparel and accessories retailer for young women reported same-store sales fell 6.5%.
*Chico's a fashionable apparel and accessories retailer for older women, also let down investors with a 7.3% decline in comparable-store sales vs. the 0.6% dip anticipated.

The DOW dropped around 150 points yesterday on this news. Given the gravity of the situation I think the markets handled it well.

The excuse that weather or the Easter holiday effected sales sounds like it was penned in advance, like a press release. These retailers know what is going on in there own stores. I bet none of them expected such a large, broad-based downturn though. The shear number of retailers showing a loss is startling.

I think we will see retail numbers improve soon but not enough to get them out of the hole. Look for a spin job when that happens.

Is this the first boulder of an avalanche of downward movements? Perhaps.
Look for May numbers to be lack-luster or even negative.
July will be a defining month as the housing mess gets deeper. If retail sales continue to drop, the stock markets won’t take it well leading to a spiral.
Vern

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