Dr. Retail? How About A Rebate?

David Brooks, Op-Ed columnist for the NY Fishwrap, created a brilliant persona in his recent column on the Democrat bloodletting: Dr. Retail. The January sales figures for U.S. merchants were mighty grim, despite all of the rebates. However, does the reality that rebates aren't the answer penetrate the Beltway? Even though Amy Winehouse is singing about her aversion to rehab, her "Rehab" refrain applies to the efficacy of rebates: "No, no, no!" If Wal-Mart and Target can't turn the post-Christmas season around with rebates, what makes Congress and the White House think rebates are going to turn the country away from recession? No, no, no. If this is (fair & balanced) harsh reality, so be it.

[x Dow Jones]
January Retail-Sales Numbers Worse Than Grim Forecasts

CHICAGO (Dow Jones) -- With few exceptions, it was a miserable start to 2008 for U.S. retailers. Many of the biggest names in the sector on Thursday posted January sales numbers that were even worse than already grim Wall Street forecasts.

Judging by the numbers, Americans cut back sharply on their spending last month, pinched by high gasoline prices, the credit crunch and fears that a recession is imminent -- or perhaps already here.

Starting at the top, Wal-Mart Stores (WMT) said unfavorable weather led to a January same-store-sales increase, excluding fuel sales, of just 0.5% from a year earlier. That compares with an average estimate of analysts polled by Thomson Financial of same-store sales -- those at locations open at least a year -- rising 2%.

Still, Wal-Mart backed its fourth-quarter target for earnings from continuing operations of 99 cents to $1.03 a share.

Total sales at the world's largest retailer for the four weeks ended Feb. 1 increased 7.9% to $27.28 billion, up from $25.29 billion. For the current month, Wal-Mart anticipates same-store sales to be between flat and up 2%

Archrival Target (TGT), meanwhile, saw a January same-store sales decline of 1.1%, hurt in part by weaker lawn and garden and jewelry sales. The analyst estimate was for a drop of 0.6%. The Minneapolis-based retailer said net retail sales for the four weeks ended Feb. 2 increased 5.4%. Looking forward, Target is forecasting February same-store sales down 1% to up 1%

Moving upscale, Nordstrom Inc. (JWN) said that its January same-store sales fell 6.6% -- far worse than the 0.7% decline that analysts estimated. And total sales for the four weeks ended Feb. 2 were down a whopping 20.3% to $486.3 million.

At teen-wear retailer Wet Seal (WTSLA), January same-store sales were off 5.7%, versus the analyst view of a decline of 1.5%. And net sales for the month were down to $36.8 million from $43.9 million. But the company did boost its fourth-fiscal-quarter earnings target to between 9 and 10 cents a share, compared with its prior forecast of 6 to 8 cents, primarily due to better-than- expected operating-expense savings and a slight widening in margins.

For Limited Brands (LTD), parent of Victoria's Secret, January same-store sales fell 8% from a year ago, while total sales declined to $625.8 million from $1.06 billion. The Columbus, Ohio-based apparel and personal-care retailer said comparable-store sales for the 13 weeks ended Feb. 3 also fell 8%, while net sales declined to $3.23 billion from $4.03 billion. On average, analysts polled by Thomson Financial had expected January comparable-store sales to decline 6.9% .

On a slightly brighter note, closeout retailer Big Lots (BIG) said its fourth- quarter same-store sales fell 0.6%, with overall sales down 8.5% to $1.4 billion, in line with previously provided expectations.

"It is a really tough time for shopper psychology," considering all the downbeat economic news, said Sarah Henry, a retail analyst with MFC Global Investment management. "And that can be enough to make people stop spending on discretionary items. It is hard to drive sales in an environment like this."

She described overall results as "mixed" but noted that at Wal-Mart, many gift card redemptions were being used for lower-margin food and other consumables rather than discretionary purchases, a "very telling" indication of what consumers are thinking.

That attitude is pinching the department stores, chains like Macy's and Nordstrom, who were already contending with a weak holiday season and in January had to "cut prices pretty urgently to clear out inventory."

Yet there were a few upside surprises, including Costco Wholesale (COST), where January same-store sales rose 7%, with 5% growth in the U.S. and 19% growth overseas. Total sales for the period rose 11% to $5.11 billion. The analyst estimate was for a 6.6% rise in same-store sales.

J.C. Penney's (JCP) same-store sales fell 1.9%, compared with a year earlier increase of 3.6% with total department store sales rose 1.7%, and direct sales up 3.6%. Wall Street was looking for a 6.3% decline in same-store sales. For February, Penney projects February comparable-store sales to be flat, with comparable-department store sales decreasing in the low single digits on a percentage basis. And the company now projects fiscal fourth-quarter earnings to come in at the high end at the high end of its original target range of $1.65 to $1.80.

And the Children's Place (PLCE) said same-store sales increased 6% from the prior year's comparable period, due in part to higher promotional levels -- nearly three times the 2.2% pace Wall Street was looking for. The Secaucus, N.J.-based chain also said total sales for the four weeks ending Feb. 2 fell 4% to $121.7 million from $127.4 million the previous year.

However, Children's Place added that it had gotten a Nasdaq staff determination letter stating that it is not in compliance with regulations because it failed to hold its annual shareholder meeting by Feb. 3. The company said it will request a hearing for an extension, saying the meeting was postponed due to a delay in filing an annual report.

Ann Taylor (ANN) had flat same-store sales in January, versus the expected 4% decline. But total January sales at the New York-based retailer dipped 15% to $ 127.9 million.

Moving back to the red ink, Stein Mart (SMRT) said it would suspend its quarterly dividend in order to provide "more flexibility" to deal with worsening industry conditions. In January, the Jacksonville, Fla.-based retailer's sales fell almost 10% to $81 million, while same-store sales were down 2.5%. For the fourth quarter, Stein Mart forecast a loss in the range of 28 to 33 cents a share. Analysts polled by Thomson Financial had expected, on average, a loss of 44 cents a share for the fourth quarter.

Macy's (M) got the ball rolling in the wrong direction Wednesday when it announced that January same-store sales fell 7.1%, worse than a previously expected decline of 4% to 6%. Total sales for the four weeks ended Feb. 2 fell to $1.28 billion from $1.78 billion a year ago, hurt in part by the fact that there was one fewer week in the January 2008 calendar.

The department-store chain also announced various restructuring and consolidation moves that will cost more than 2,500 workers their livelihoods.

Copyright © 2008 Dow Jones & Company, Inc.

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