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Retail chains see red over comp-store drops

David Gill -- Home Textiles Today, June 8, 2001

NEW YORK — The Red Sea fell in upon the major U.S. retail chains in May.

More than half of the chains tracked monthly by Home Textiles Today reported same-store sales declines for last month; two of these, Value City stores and the Saks Inc. corporate store group, reported comp-store drops of more than 10 percent.

The Saks numbers arrived at almost the same time as the announcement that the company will trim the number of jobs in its corporate office through the rest of this year and the next, and take non-cash charges as it streamlines its Saks Direct unit and consolidated other parts of its business.

Ames almost hit the double-digit-drop level as well, coming in with a 9.9 percent plummet. Commenting on the chain's results, Ames' chairman and ceo, Joe Ettore, hit upon the themes many retail executives and industry analysts pointed to: unstable economy, high gasoline prices, lousy weather.

"In May," Ettore said, "our customer continued to be affected by the instability of the economy and the spike in gasoline prices. Unseasonable weather also continued to be a factor as cooler temperatures and rain prevailed during the month, including the critical Memorial Day weekend."

These three bombs laid waste to same-store sales in all of the channels of distribution. Among the department stores, Federated, JCPenney, Dillard's and Marshall Field's all fell in comp-store results; May Co. posted a meager gain of 1.1 percent.

Among the national chains, Sears' comps dropped 3.3 percent. The retailer's chairman and ceo, Alan Lacy, said, "May was another challenging month, as the slowing economy continued to affect sales and the cooler weather discouraged consumers from purchasing seasonal items."

Wal-Mart led the way among the national mass merchants, but its 3.6 percent pickup was well below its standards — as was Target's 1.5 percent gain. Kmart finished below the line, with a 1 percent drop in same-store sales.

Chuck Conaway, Kmart's chairman and ceo, said the chain's decrease was "slightly less than plan despite major disruptions in our operations caused by resetting 20 percent of our entire store base, reducing our reliance on advertising and experiencing significantly unfavorable weather conditions across the country, which adversely affected our apparel and seasonal sales."

The feeling was that the chain results were to be expected, given that signs of weakness pervade the rest of the U.S. economy. Economic analysts pointed to the braking of consumer spending as a sign that the boom days are over for retailers.

Consumer spending, of course, was widely considered to be the chief driver in the U.S. economy's boom. In 2001, however, a new spiral of layoffs has developed — according to a report from Northern Trust Economic Research — leading to reductions of tens of thousands of jobs.

As Mickey Levy and Peter Kretzmer, economists with Banc of America Securities, observed, the consumer spending growth in the first quarter of this year was less than half the growth rate from the same period of 2000.

As for the rest of this year, said Levy and Kretzmer, "household spending likely will decelerate below its current 2.5 percent to 3 percent growth pace, perhaps significantly for a temporary period, but not decline. We expect the weaker pace of consumption growth to unfold during the middle quarters of this year, with signs of a spending pickup visible by the end of [the third quarter]."

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