Retailers, Led by Wal-Mart, Post Better-Than-Forecast Sales

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The New York Sun

July sales at the biggest U.S. retailers, led by Wal-Mart Stores Inc., rose more than analysts expected as unusually hot weather prompted consumers to seek the comfort of air-conditioned shopping.

Wal-Mart said today that sales at stores open at least a year rose 2.4%. Federated Department Stores Inc., the no. 2 department store operator, posted a 3.3% increase. J.C. Penney Co., the third-largest American departmentstore company, reported a 4.9% gain in comparable-store sales and raised its second-quarter earnings forecast.

July same-store sales gained 3.5%, the International Council of Shopping Centers said, based on 60 chains. Last month may have been the fifth-hottest July on record, according to Weather Trends International. While rising fuel costs might have discouraged some shoppers, consumers continued to visit retailers during the month.

“Consumers very definitely spent more time in the mall and stores to escape the heat, and that certainly helped clear out summer merchandise,” said Patricia Edwards, a Seattle-based money manager at Wentworth Hauser & Violich, with $8.2 billion in assets including Wal-Mart shares. “I think the consumer is holding up quite nicely.”

The hot weather helped retailers sell fans, air conditioners, pool supplies, and sun care, Weather Trends, a Plymouth Meeting, Pennsylvania-based weather consulting firm, said in an August 1 report.

Gasoline prices, which at $3 a gallon are 31% higher than a year ago, are constraining spending, particularly by low-income customers, analysts said.

Still, consumers have had more than a year to adapt to higher prices, Edwards said. They also were helped by healthy personal income, said ICSC’s chief economist, Mike Niemira.

Shares of Wal-Mart, the world’s largest retailer, rose 36 cents to $44.73 at 4:14 p.m. in New York Stock Exchange composite trading. The stock is down 4.4% this year. The Standard & Poor’s 500 Retailing Index increased 9.42, or 2.2%, to 432.13 today, and has declined 5.5% this year.

While the industrywide sales gain was 1 percentage point higher than the ICSC’s forecast, it trailed the year-todate increase of 3.8%. Comparablestore sales rose 3% in June, and were up 3.6% a year ago.

The Goldman Sachs retail index gained 3.1%, with department stores and discounters faring better than apparel retailers. That index tracked 28 retailers. Retail Metrics LLC said 56% of retailers beat estimates.

Wal-Mart said sales were strongest in Rocky Mountain states and in the West, where temperatures were especially high last month. Food outsold general merchandise, the company said on a recorded call today. While fewer shoppers came to stores, average purchases rose as customers consolidated trips.

The company said consumers responded to price cuts on back- toschool-items, buying crayons, pencils and notebooks along with clothing and basic items for dorm rooms. They also snapped up water toys.

“It looks like the consumer’s hanging in,” Retail Metrics analyst Ken Perkins said in an interview.

Federated’s sales gains were just above analysts’ estimates of 3.2%, according to Retail Metrics, which is based in Swampscott, Massachusetts. Plano, Texas-based J.C. Penney raised its second-quarter earnings estimate for the third time, adding 6 cents to 71 cents per share.

The New York Sun

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