October 11, 2007 / 12:50 PM / 12 years ago

Warm weather dampens retail sales

NEW YORK (Reuters) - Most U.S. retailers reported dismal September sales that missed Wall Street’s expectations, hurt by unusually warm weather, prompting some to cut their outlook for the entire quarter.

A view of the Wal-Mart store in Broomfield, Colorado, June 7, 2007. Many of the leading U.S. retailers reported dismal September sales that missed Wall Street's expectations, hurt by unusually warm weather, prompting some to cut their outlook for the entire quarter. REUTERS/Rick Wilking

“The weather had a great deal to do with what happened. Who wants to buy a heavy coat when the temperature outside is 100 degrees (Fahrenheit)?” said Kurt Barnard, president of Barnard’s Retail Consulting Group.

The unseasonal warmth, Barnard said, had reached across the entire retail spectrum.

Much of the eastern two-thirds of the United States was 2 to 6 degrees warmer than normal in September, which was the eighth-warmest since 1895, weather tracking firm Planalytics said.

That hurt several apparel companies which focus on seasonal items, as a lower number of consumers shopped, and those who did postponed buying items such as sweaters, scarves and coats.

Last September was the 15th-coldest recorded, according to Planalytics, adding to tough year-over-year comparisons.

Industry leader Wal-Mart Stores Inc (WMT.N), despite raising guidance for the full quarter on improved margins and lowered expenses, said on Thursday its same-store sales, up 1.4 percent, was still at the low end of its expectations.

No. 2 U.S. discounter Target Corp (TGT.N), which also reported disappointing sales on Thursday, said full-year earnings would be lower than previously expected.

September sales at 49 U.S. retailers rose a combined 1.7 percent, according to the International Council of Shopping Centers, below its most recent forecast of about 2 percent.

The overall sales results, experts said, indicated that the looming holiday season would be highly promotional and competitive for most retailers.

Though discounters like Wal-Mart and Target missed analysts’ sales estimates, they could fare well in the holiday period, said Barnard.

“Chances are (consumers) are going to sidestep very expensive items in favor of merchandise that is more available at reasonable prices,” he said.

Sales at Wal-Mart’s supercenters could be a bright spot in the holiday season, as lower-income consumers consolidate their shopping trips to one-stop stores, said Frank Badillo, senior retail economist at TNS Retail Forward.

The Standard & Poor’s Retail Index .RLX fell 1.33 percent in late-afternoon trading.

CONSUMER TROUBLE AND HOLIDAY SHOPPING

Consumers, faced with a housing slump and high gas and food costs, hesitated to dip into their pockets, adding gloom to weather-depressed sales, said Ken Perkins, president of Retail Metrics Inc.

Lackluster retail sales trends this year have raised concerns about the state of consumer spending, which makes up about two-thirds of U.S. economic activity.

Perkins said that in September, 64 percent of retailers missed sales expectations, well above the normal 44 percent.

At Wal-Mart, while overall apparel and home goods sales stayed weak, low-margin food outdid sales of general merchandise and it, too, blamed warm weather and tighter consumer spending for weak sales of cold-weather items.

Struggling retailer Gap Inc (GPS.N) said on Thursday that September sales at stores open at least one year fell 7 percent, worse than the 4.4 percent decline that analysts had expected.

Same-store sales at American Eagle Outfitters Inc (AEO.N) fell 2 percent, it said on Wednesday. Sales at Limited Brands Inc LTD.N dropped 4.4 percent as customer traffic slowed, it reported on Thursday.

While American Eagle, Limited and apparel retailer Children’s Place Retail Stores Inc (PLCE.O) cut their quarterly profit outlook this week, Wet Seal Inc WTSLA.O trimmed its forecast earlier this month.

Teen retailers like Aeropostale Inc ARO.N and Pacific Sunwear of California Inc PSUN.O, however, posted a surprise increase in sales on Thursday.

At high-end retailers like Saks Inc SKS.N and Nordstrom Inc (JWN.N), weak sales were due to “aspirational consumers” who chose to fill up their gas tanks over buying a pricey pair of shoes, said Craig Johnson, president of retail consulting firm Customer Growth Partners.

Though sales at those upscale chains would be strong in the holiday season, they would still face some pressure, Badillo said.

“A lot of those upper-income households are taking a hit in terms of home value. They don’t feel as wealthy,” he said.

So far this fiscal year, retail sales have dropped considerably from last year’s 3.6 percent rise, said Michael Niemira, chief economist of the International Council of Shopping Centers.

“We expect to see much of the same for the foreseeable future,” he said.

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