Sales at some of the nation's best-known retailers fell by double digits in September, highlighting the rapid deterioration of the economy and raising fresh questions about how many of those chains can survive.
Retail analysts and executives said they had not seen such a rapid slowdown in consumer spending since the nation's last deep recession in the early 1980s. Retail executives, though braced for bad news, were stunned at the magnitude of the drop-offs reported yesterday. Retailers high and low – such as Nordstrom, J.C. Penney and Kohl's – lowered their earnings projections.
September sales for stores open at least a year, known as same-store sales, a barometer of retail health, plunged 14.8 percent at Stein Mart, an off-price department store. That chain, like many others, was already in trouble a year ago, but the drop-off last September was only 9.1 percent.
Sales at Dillard's dropped 12 percent, compared with a 7 percent decline last year. J.C. Penney's same-store sales fell 12.4 percent, compared with a decline of 3.7 percent for the period a year ago. Sales at Kohl's decreased 5.5 percent, compared with a 3.2 percent decrease last year.
At Bon-Ton Stores, same-store sales decreased 4.6 percent, and they declined 3 percent at Target.
The sales results laid to rest any lingering notion that the nation's luxury retailers might be impervious to the downturn. Same-store sales in the specialty-retail segment of Neiman Marcus, which includes Neiman Marcus Stores and Bergdorf Goodman, tumbled 15.8 percent. Saks' same-store sales sank 10.9 percent and Nordstrom's were down 9.6 percent.
Blake W. Nordstrom, president of Nordstrom, said the deteriorating consumer environment led to “a weakening sales trend that was greater than our earlier expectations.”
Specialty-retail sales figures, too, were soft. At Zumiez, same-store sales were down 9 percent, compared with a 13.9 percent increase in the year ago period. Same-store sales at Wet Seal were down 7.5 percent. Sales at American Eagle Outfitters and Limited Brands decreased 6 percent.
At Pacific Sunwear, sales were down 5 percent, while Children's Place fared slightly better. Its sales were flat, compared with a 2 percent decrease last year. The exception in this category was Aeropostale, which reported a 5 percent increase in same-store sales, compared with a 1 percent increase in the year ago period.
Dean Hillier, a partner and a retail specialist with A.T. Kearney, a management consultant, said the Christmas shopping season “could quite frankly be one of the worst we've seen in 25 years.”
It might be a holiday of movie tickets and board games, not of big-screen televisions and vacations, he said. “This is the cocooning that we saw in the '80s, for goodness sakes, that we're seeing coming back,” Hillier said.
Sales drops of 5 percent or 10 percent might not sound like the end of the world. But because store chains have fixed costs, declines that large can devastate their profits and discourage banks from offering the financing necessary to run such a seasonal business. Most of the chains will report their third-quarter profits in October and November.
Some analysts are expecting a fresh wave of bankruptcies among store chains after the holidays. Already, famous names such as the Sharper Image and CompUSA have gone out of business. Share prices of most leading retailers, which have been declining for many months, fell by 2 percent to 5 percent yesterday.
Shares of Circuit City Stores, the struggling electronics chain, fell 18 percent, to 41 cents a share, down from $9.02 a year ago. That chain had said Sept. 29 that same-store sales for three months ending in August fell 13.3 percent.
In general, the weakest categories in yesterday's report were nonessentials such as house wares, furniture, electronics, jewelry and women's apparel. To the extent stores showed any strength, it was in must-have categories such as food and children's clothing.
“Even the uber-wealthy are slowing down,” said Bill Dreher, an analyst with Deutsche Bank Securities. “It's going to be a discount-store Christmas.”
Indeed, warehouse stores, where affordable groceries can be bought in bulk, continue to be the bright spots in the retailing firmament. Costco's same-store sales in the United States were up 6 percent (not including increased prices for gasoline sales), compared with the same period a year ago. Same-store sales at BJ's Wholesale Club increased 5.6 percent, not including sales of gasoline. Sales at Wal-Mart Stores were up 2.4 percent excluding fuel sales, though Wal-Mart noted that sales of discretionary items were soft.
