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Bargain hunters boost Wal-Mart source

Posted by retailigence on September 10, 2008

Wal-Mart Stores Inc. ‘s August sales exceeded Wall Street expectations and beat much of the retail sector in August as shoppers pressured by high gasoline and food prices continued to look for bargains. The Bentonville-based company reported sales in stores open at least a year rose 3 percent from last year, excluding fuel. The increase was twice the average of estimates surveyed by Thomson Financial and by Retail Metrics Inc.

Dillard’s Inc. of Little Rock said its same-store sales fell 7 percent, more than the average 4. 7 drop analysts expected, according to Thomson. Other department store chains also struggled in September, as sales for stores open at least a year at Nordstrom fell 7. 9 percent, Kohl’s fell 5. 8 percent and J. C. Penney dropped 4. 9 percent. Wal-Mart said grocery and health and wellness showed the strongest sales, but it also cited gains in electronics.

“The customer is moving to value. In many cases they don’t have a choice,” H. Lee Scott, president and chief executive officer at Wal-Mart, told analysts at a retail conference sponsored by The Goldman Sachs Group Inc. His remarks were Webcast on the Internet. Scott also noted, however, that customers are willing to spend on “things that they believe are improving the quality of their lives.” In particular, he said, Wal-Mart is seeing increased sales of flat-screen, LCD televisions, video games and cell phones. Wal-Mart’s stock closed Thursday at $ 59. 78 a share, down 1 cent or 0. 2 percent, in trading on the New York Stock Exchange. It has traded as high as $ 61 and as low as $ 42. 09 in the past year.

“What a difference a year makes for Wal-Mart, and it’s clearly reflected in the stock price,” Adrienne Shapira, Goldman Sachs retail analyst, said as she introduced Scott. Rival Target Corp. reported a 2. 1 percent drop in comparable store sales in August, which Gregg Steinhafal, president and chief executive officer called “in line with our planned range” in a company news release. Sales in stores open at least a year are a key measure for retailers because they exclude the impact of stores opened or closed within the past year. Within Wal-Mart’s operations, the Sam’s Club members-only division recorded a 4. 2 percent increase in same-store sales, excluding fuel sales, which have risen sharply because of higher prices. The U. S. stores division boosted sales by 2. 8 percent.

Sam’s warehouse club rivals did even better, with Costco Wholesale Corp. of Issaquah, Wash., posting a 6 percent gain and BJ’s Wholesale Club Inc. of Natick, Mass., up 7. 7 percent. Both figures exclude the impact of fuel. Wal-Mart’s status as the world’s largest retailer made the overall retailing picture in August look better than it was, Ken Perkins, research analyst with Retail Metrics, said in a report. With Wal-Mart, overall retail sales were up 2 percent, but without Wal-Mart, sales were up only 1 percent, he said. Other discount stores recorded larger percentage gains, however, averaging 4. 9 percent, excluding Wal-Mart, Perkins said.

Family Dollar Stores Inc. reported sales up 3. 6 percent. Dollar Tree Stores Inc. reported same-store sales for its second quarter up 6. 5 percent. John Lawrence, analyst with Morgan Keegan & Co. Inc. in Memphis, said Wal-Mart’s turnaround efforts over the past couple of years are succeeding. “It is evident that the initiatives management put in place continue to gain traction as consumers continue to trade down,” he wrote in a research note to clients. Wal-Mart said 95 of 128 company facilities that were closed because of Hurricane Gustav have reopened. Thirty-three Louisiana locations had not reopened. Dillard’s said that anticipation of Hurricane Gustav’s arrival disrupted operations at 24 Gulf area stores during the period. Thirteen Dillard’s stores were closed because of the hurricane, but the stores had little damage and eight of the 13 are now open, the company said.

Dillard’s stock closed Thursday at $ 13. 21 a share, down 24 cents or 1. 78 percent, on the New York Stock Exchange. It has traded as high as $ 24. 86 and as low as $ 7. 61 in the past year. Scott said current economic conditions have changed expectations for retailers. “Who would have ever thought that we would be celebrating 3 percent comps [comparable store sales increases ], and yet we are,” he said at the Goldman Sachs conference. He said the company’s plans anticipate that economic conditions next year “will look very much like this year.” Kimberly Noland, director of high-yield research for Gimme Credit, a New York-based firm that researches corporate bonds, said in a report Wednesday that mid-tier retailers likely will continue to suffer.

“Cash-strapped customers worried about their jobs have reined in spending on apparel and appear to be doing most of their shopping at mass merchandisers that promote price and value,” she wrote. “Dillard’s focus on fashion, upscale merchandise and traditional department store offerings limits its ability to respond to a weak economy.”

Sources:- nwanews

Contributed by:- Vipin Rawat


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