Spring weather didn't help retailers much
There were enough negatives last quarter to shake hopes that Americans would resume shopping after the long, tough winter.
American retailers may have more than a weather problem.
Family Dollar Stores (FDO) said fewer shoppers came into its stores in the three months through May 31, pushing sales down 1.8 percent, excluding newly opened or closed stores.
In a move to win back traffic, the dollar chain said it would begin carrying beer and wine next year, adding to the tobacco, frozen food and other consumables that now make up 73 percent of sales.
"Our results continue to reflect the economic challenges facing our core customer and an intense competitive environment," Chief Executive Howard Levine said.
The discounter's message echoed that of The Container Store (TCS), whose shares fell more than 8 percent Wednesday after its chief executive told investors that the company and its fellow store chains are in a "retail funk."
"We've come to realize it's more than just weather," Chief Executive Kip Tindell said. Falling traffic led to the first quarterly sales drop at the company in more than three years.
Investors flocked to the seller of bins, boxes and shelves when it went public last November, and shares more than doubled on opening day to close at $36.20. But so far this year, shares have dropped nearly 47 percent, as Container Store has succumbed to some of the pressures weighing on retail broadly.
Results at retailers haven't been uniformly bad this spring. But there enough negatives to shake earlier hopes that shoppers would whip out their wallets and resume shopping after the long, tough winter. The mixed showing continues to cloud the optimism arising from stronger job growth and rising consumer confidence.
The unemployment rate dropped to 6.1 percent in June, marking the best stretch of job growth in almost a decade. But five years into the economic expansion, big chains like Wal-Mart Stores (WMT) and Kroger (KR) remain divided over whether consumers are indeed bouncing back.
Wal-Mart U.S. President Bill Simon said this week that the declining unemployment rate is doing little to bring shoppers into its stores. In an interview on CNBC, he predicted it will take six months to a year for retailers to start seeing a sales boost from job growth.
Sales at Wal-Mart's U.S. stores, excluding newly opened and closed stores, have been negative for five straight quarters, and traffic has dwindled for a year and a half.
The economy's gains are giving a lift to shoppers who are already better off, but the low-end consumer "isn't gaining traction," Mr. Simon said.
Lumber Liquidators (LL) warned late Wednesday that customer traffic in the second quarter was significantly weaker than expected and lowered its financial guidance for the year. Shares in the flooring retailer fell 22 percent in early trading Thursday.
Tractor Supply (TSCO), a chain of farm and ranch stores, warned that its results for the year will likely be at the lower end of its projections, blaming challenging spring weather conditions.
Kroger has a different take. Shoppers are "exhibiting less cautious spending behavior," CEO Rodney McMullen told investors in June. "More customers perceive the economy to be in recovery" and are shelling out for things like premium pet food and organic products.
Near-term trends aside, store chains across the retailing industry are wrestling with what could be a permanent decline in shopper visits. Customers now use their mobile phones and computers to compare promotions, prices and products before heading into a physical store to buy clothes, electronics and increasingly, groceries.
Fewer visits mean fewer chances for impulse purchases as shoppers cherry pick promotions that sometimes produce losses, changing the calculus for retailers that have built their stores around now changing traffic expectations.
"Shoppers are making targeted visits to malls and going into fewer stores," said Christopher Ainsley, CEO of ShopperTrak, a Chicago-based data firm that records store visits for retailers using tracking devices installed at 40,000 outlets in the U.S.
ShopperTrak is changing up the way it presents its data, as mall owners and retailers come to terms with declining store visits. In reaction to feedback from the retailers ShopperTrak serves, the firm said starting July 17 it will quit reporting results from individual malls and instead report the tallies by ZIP Code.
The firm said its customers wanted a way to understand what was happening in the broader area as opposed to just at individual malls.
Container Store said traffic had declined in the quarter, offset somewhat by higher tickets for the shoppers who did show up. Sales fell by 0.8 percent in the quarter ended May 31 from a year earlier, excluding newly opened or closed stores, and the company lowered its full-year financial forecast.
The chain's CEO, Mr. Tindell, said Container Store tried to resist the impulse to join other retailers in ramping up discounts to draw shoppers in.
Retailers, he said, are training Americans to only come out to shop when there are deals in what has become "the most promotional environment I've seen in my career."
A handful of retailers reported June sales on Thursday, showing mixed results.
Costco Wholesale (COST) reported a 6 percent increase in June sales, excluding gasoline, surpassing analysts' estimates for 5.4 percent growth. The company said foreign currencies had a negative impact, however.
Top-performing categories at Costco included fresh foods, jewelry, apparel, housewares, lawn and garden and health and beauty. Consumer electronics sales were mostly flat, Costco said.
L Brands (LB), formerly Limited Brands, said sales grew 2 percent last month, falling short of consensus estimates for a 3.1 percent increase. Growth was led by a 3 percent increase in sales for the company's Victoria's Secret brand, driven by its lingerie segment and young-adult oriented Pink line. However, that was still below the 3.2 percent growth expected for the brand.
Meanwhile, L Brands' Bath & Body Works brand reported sales growth of 1 percent, missing expectations for a 3.3 percent increase. L Brands said it expects sales to increase in the low single digits in July for the company as a whole.
Among teen retailers, Zumiez (ZUMZ), which sells action sports-related apparel and footwear, reported a 3.1 percent increase in sales, when 1.8 percent growth was expected. The better-than-planned sales, in part, led the retailer to raise its guidance for the quarter.
The Buckle (BKE), meanwhile, said sales improved 0.7 percent, beating analysts' projections for a 0.6 percent decrease.
—Anna Prior and Erin McCarthy contributed to this article.
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We are still in a Death Spiral of Lost Jobs and an ever weaker and weaker economy. They are redefining how they calculate GDP every quarter to try to show it growing and not contracting.
We ares till losing $100,000 plus jobs and replacing only 10 percent of them with minimum wage jobs at 29 hours a week which is $10,000 a year.
The cost to live in America has risen to about $120,000 a year for a family of 4. So with most Americans making less than $38,000 a year just how is the economy going to get better???
economists in another article claim gdp growth will be over 3% on average. if thats true, we started the first qtr with negative 2.9% which means we will need to grow at 9% the rest of the year to get there. LOL
Of course MSN won't let you comment in that article.
LOL MSN is trying to claim job growth in this article because of a lower unempllyment number?
Bwahhaha. America still has near 90 million people not working. That is still way up from when Bush left office.
There are no new jobs. msn keeps shoveling what obama poops.
Wait so the nice typical spring weather didn't help sales? But but but, all these economists stated that the 2nd qtr gdp will be so much better!!
if its not, what will MSN blame it on if not the weather? oh I know, they will blame Bush for 5.5 years of obama economic policies
We walked away from investments in Retailers last year or so...Just not like they use to be...
Did or do any of you have anything/stocks, in Retail, which company...??
"our 6th. attempt at a summer of recovery"...
all "Americans are Broke.."
Do ANY of you live in same Country I do?? America,USA.
a "Death Spiral of Lost Jobs".... ....90 Million Americans not working, is that 3 year olds too..?
"$120,000 to raise a family of 4"......?
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