As we pointed out last year on several occasions, it is not just the Australian retail sector that is feeling pain at the moment. American retailing is doing it tougher as they face sluggish customers, moderate economic growth and the growing clout of online giants such as Amazon.
The March quarter reporting season has underlined the stresses in the US sector, and quarterly reports this week from giants, Target, Home Depot and Wal-Mart, and discounters, TJX Cos and Ross Stores will tell us more about the extent of the slowdown.
Another weaker than forecast monthly retail sales report also added to the pressure on sentiment around the sector. The less-than-expected 0.4% month-over-month increase in April retail sales was short of market estimates for a 0.6% rise.
Sales at clothing stores fell 0.5% in April, underlining the damage to department store retailers have been hurt by declining traffic in shopping malls and increased competition from online retailers, led by Amazon.com. In fact sales by online retailers rose 1.2% in April.
In fact the retail sales report showed Americans spent more at electronics and appliance stores in April and inhealth care retailers, and sporting goods outlets. But sales fell at grocery stores and clothing merchants.
The retail earnings part of the March quarter reporting season kicked off last week and it was a bleak start with major department stores posting disappointing results as the likes of JC Penney, Macy’s Nordstrom, Kohl’s (down 8% on Thursday) and Dillard’s all missing market forecasts on sales, sales growth and earnings.
Macy’s said like-for-like sales fell 4.6% in the first quarter compared with the same period last year. At Kohl’s, like-for-like sales slid 2.7% and were down 0.8% at Nordstrom. Hudson’s Bay Co, which owns chains including Saks Fifth Avenue, said its same-store sales fell 2.9%.
Macy’s said its profits fell 39% to $US71 million in the quarter compared with the same period last year while net sales fell 7.5% to $US5.34 billion, missing the market estimates of $US5.47 billion.
In fact JC Penney shares hit an all-time low overnight Friday after reporting worse than expected sales and a profit that wasn’t a profit (it came after a big asset sale). Penny shares fell 14% at one stake, Nordstrom shares lost more than 10%, Macy’s fell 3% after dropping 16% on Thursday.
In fact Macy’s shares have almost halved in the past six months and Penney’s shares have halved since early last December.
“The department store environment remained challenging in the first quarter with weak sales reported from key players…,” according Moody’s analyst Christina Boni. “Particular sales weakness was highlighted in February.”
This week investors will be watching to see so-called off-price retailers — like TJX Cos (which has started in Australia via its German arm, TK Marxx) and Ross Stores, which buy excess inventory produced by designers at big discounts can to buck the slump or join the chorus of disappointing results.
Wal-Mart Stores, the world’s largest retailer, is also among the companies reporting earnings next Thursday, with target reporting the day before. Weak reports from any of those four retailers will trigger another sell off.
