Clothing chains stumble as shoppers cut back
NEW YORK (Reuters) - Clothing retailers reported dismal same-store sales results for September as the global financial crisis further squeezed consumers who were already cutting back because of the weak economy.
The gloom spread to off-price chains, which tend to outperform competitors in tough times because of their low prices. Ross Stores Inc (ROST.O) and TJX Cos Inc (TJX.N) joined specialty chains Abercrombie & Fitch (ANF.N) and Chico's FAS Inc (CHS.N) on Thursday in posting worse-than-expected sales and cutting or withdrawing their earnings outlooks.
The results extend a drumbeat of bad news that started a day earlier when chains including Target Corp (TGT.N), J.C. Penney Co Inc (JCP.N) and Saks Inc (SKS.N) disappointed investors with weak sales and cut their outlooks for the key holiday shopping season.
The dismal figures showed the global credit crisis and plummeting stock market of the past month left almost no retailer unscathed.
Overall, September same-store sales rose only 0.8 percent from a year ago, according to a sector-wide Thomson Reuters index of 34 retailers that reported in the past two days. That is about half as much as analysts expected -- the weakest September in at least eight years.
Looking ahead to October, overall same-store sales are expected to rise 1.5 to 2.5 percent, due in part to an easy comparison with October 2007, which was the weakest October since 1995, according to the International Council of Shopping Centers (ICSC).
Last year's warmer-than-usual autumn let people put off buying winter clothes.
September was "a very weak month overall, with nearly all companies reducing earnings guidance," said apparel analyst Paul Lejuez of Credit Suisse in a research note. "For the first time in recent memory the off-pricers ... posted negative comps (same-store sales) and revised earnings down."
The Standard & Poor's Retail Index .RLX closed down 7.9 percent, slightly underperforming the wider S&P 500 index .SPX, which ended down 7.6 percent.
"Consumers are bracing for recession," said Retail Metrics president Ken Perkins. "Credit will continue to be very difficult to come by through the holiday shopping season and the jobs market is likely to deteriorate further."
Perkins said the performance gap between the likes of Wal-Mart Stores Inc (WMT.N) and Costco Wholesale Corp (COST.O), which sell necessities like food and medicine, and more discretionary retailers widened in September and should continue to do so as consumers forgo new clothes, accessories and home goods.
INSTABILITY HURTS SALES
Chico's reported a 15.6 percent fall in September sales at stores open at least a year, while analysts on average were expecting a 13 percent drop, according to Thomson Reuters Estimates.
"Our disappointing September sales results reflect the deteriorating macroeconomic environment," Chico's Chief Executive Scott Edmonds said in a statement. "This, combined with the unstable financial markets, has caused us to essentially withdraw our previous earnings outlook for the second half of this year, as predictability of future results is extremely difficult at this time."
Abercrombie said September same-store sales fell 14 percent, far worse than the 8.1 percent drop expected by analysts. The teen apparel retailer warned that "absent notable improvement in the macroeconomic environment and a return of consumer confidence," it expected current business trends to continue into the all-important holiday fourth quarter. Continued...
