Experiencing weakness in every department of its traditional mall stores, Sears, Roebuck and Co. was one of the few major retailers to post disappointing May sales, and the Hoffman Estates merchant on Thursday provided a more somber assessment of its second-quarter financial outlook.
The nation's biggest department store chain, on pace for its fourth straight year of shriveling sales, reported on Thursday that revenues in May dropped 3.7 percent. Wall Street expected a dip of only 0.1 percent in same-store sales, or sales at stores open at least a year, according to an analyst survey by Thomson First Call.
Problems persisted with Sears' "soft lines," including clothing and home furnishings. But what Sears watchers found most alarming was slackening sales in several meat-and-potatoes Sears businesses, including consumer electronics.
"Of particular concern was the announcement that total appliance was down in the range of 1 percent to 3 percent, and lawn and garden and fitness was down in the range of 7 percent to 9 percent," Merrill Lynch analyst Daniel Barry said in a report Thursday. "Considering the unusually warm weather, particularly on the East Coast, these two divisions should be performing better."
Sears continues to struggle even as 74 retail chains on average posted a better-than-expected increase of 5.7 percent in same-store sales compared with last May, according to the International Council of Shopping Centers. The group was forecasting a 5 percent improvement. Many of the nation's largest merchants, including Wal-Mart Stores Inc., Federated Department Stores Inc. and Costco Wholesale Corp., posted solid numbers in May.
"While there's been a worry about high gasoline prices, at this point it has not affected spending," said Michael Niemira, chief economist at the International Council of Shopping Centers.
And the outlook for retailers in general in June is bright, with same-store sales expected to be up 5 percent to 6 percent, the council says.
Sears, however, won't be running in that pack.
As recently as mid-May, it predicted that sales in the second quarter would be flat to slightly improved. But on Thursday, Sears ratcheted down its estimates, now forecasting revenues in the quarter ending June 30 to be flat or down slightly.
"I think Sears is heading for a very bad place," said Howard Davidowitz, chairman of New York-based retail consulting and investment banking firm Davidowitz & Associates Inc.
"What you have is a store that simply is not driving in customers," he said.
Sears' strongest proprietary brands, including Kenmore, Craftsman and Diehard, are under pressure as other retailers open hundreds of stores a year while Sears' store base stagnates. And the major retail initiatives that Sears is undertaking aren't paying off either, Davidowitz said, citing Sears' purchase of Lands' End to improve its apparel reputation.
On Thursday, Sears' stock fell 2.6 percent to close at $37.13.
Wal-Mart reported an overall same-store gain in May of 5.9 percent--better than the 5.0 percent analysts expected. Costco reported a 16 percent increase. Analysts polled by Thomson First Call expected a 10.3 percent gain.
Target Corp.'s results were pulled down by its Mervyn's division, and it posted a same-store sales increase of 4.6 percent, below the 5.1 percent Wall Street expected.
Nordstrom Inc. reported a same-store sales increase of 9.4 percent, better than the 6.1 percent Wall Street expected. Saks Inc., which operates Saks Fifth Avenue stores and moderate-priced stores like Younkers and Carson Pirie Scott, reported a 9.4 percent gain in same-store sales, better than the 6.2 percent analysts anticipated.
Federated had a 2.9 percent increase in same-store sales. Analysts had expected sales to be up 1.7 percent from a year ago. J.C. Penney Co. reported a same-store sales increase of 9.1 percent in its department store sector. Analysts expected 4.1 percent.
May Department Stores Co. posted a 3.1 percent decline in same-store sales, worse than the 1 percent decline forecast.
Gap Inc. posted a 6 percent increase in same-store sales, above the 4.9 percent forecast. AnnTaylor Stores Corp. had a 9.9 percent increase in same-store sales, above the 4.5 percent analysts expected. Talbots posted an 8.1 percent increase in same-store sales, compared with the 2.3 percent forecast.
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Retail sales rise
Following disappointing numbers in April, retail sales shot up in May, with wholesale clubs showing the strongest gains. An exception was Sears, whose sales continued to slide.
SAME-STORE SALES IN MAYCopyright © 2015, CT Now
Percent change from 2003 for select stores
J.C. Penney 9.1%
Sam's Club 11.8%
Source: International Council of Shopping Centers