July CE Sales Slump For Discount Chains

By Alan Wolf -- TWICE, 8/6/2009

New York - Summer's dog days came early for national discount chains, which reported a drop in July sales led by CE and other discretionary categories.

At Target, net retail sales slipped 3.2 percent to $4.4 billion for the four weeks, ended Aug. 1, while comp-store sales fell 6.5 percent.

The company said CE sales performance trailed the monthly average for all merchandise categories, and attributed the net revenue declines to fewer purchases and a decrease in average transaction size.

"While our sales remain challenging, we continue to experience favorable gross margin performance within categories and disciplined expense control in our retail segment," said Target chairman, president and CEO Gregg Steinhafel.

At Costco, net sales for the four weeks, ended Aug. 2, fell 5 percent to $5.4 billion and U.S. comp-store sales dropped 8 percent, due largely to the impact of lower gasoline prices.

Comp sales for Costco's combined CE and appliance category fell by the mid-single digits, due largely to "much lower" average selling prices for TVs. In contrast, TV sales were up 32 percent in units, the company said, joined by strong unit volume gains in computers and room air. CE laggards included the imaging and navigation categories.

At BJ's Wholesale Club, net sales fell 6.3 percent to $722.5 million for the four weeks, ended Aug. 1. Comp sales fell by 9.1 percent, but rose nearly 2 percent excluding the impact of gasoline deflation.

BJ's cited CE and room air among its weakest performing categories in July.

Separately, Conn's, the multiregional CE, appliance and furniture chain, said net sales slipped 0.2 percent to $190.3 million for its second fiscal quarter ended July 31, while comparable store sales fell 5.2 percent, as brisk sales of flat panel TVs and modest gains in major appliances helped offset declines in extended warranties, camcorders, desktop computers, gaming and other categories.

According to market research firm and consultancy Retail Forward, the soft July sales figures reflect continued cautiousness by consumers, although indicators point to a slight loosening of their purse strings.

"Shoppers are not yet ready to spend freely," said senior economist Frank Badillo, "but the results reported by retailers provide some signs that shoppers are easing up on their cutbacks. And that's especially encouraging given the variety of factors weighing on retail sales in July."

According to Badillo, retailers said those factors included:

a year-ago comparison period boosted by economic stimulus payments;
the shift by some states of a tax holiday period into August;
lean inventories requiring less clearance;
fewer promotions;
a later start to back-to-school shopping; and
unfavorable weather.

The handful of retailers reporting better results in July may have been helped somewhat by an improvement over time in shoppers' spending plans. According to the results of Retail Forward's July ShopperScape survey, the percentage of shoppers that plan to spend less in the coming month has trended lower in a see-saw manner since peaking at 55 percent in January. That percentage declined to 47 percent in July.

In contrast, the percentage of shoppers that plan to spend the same in the coming month has trended higher in a see-saw manner since hitting bottom at 36 percent in January. That percentage increased to 44 percent in July.

The monthly results appear to be both helped by positive trends in household investments and hurt by negative trends in household income, resulting in a mixed impact from shoppers' perception of their financial health. According to the survey, the percentage of households that perceive they are better off compared with last year with regard to their household investments has trended higher since April. That percentage increased to 12 percent in July.

In contrast, the percentage of households that perceive they are better off compared with last year with regard to their household income has trended lower since April. That percentage declined to 23 percent in July.

What's more, restrained plans for back-to-school spending, which has come to include computers, mean there will be no significant improvement in retail sales in the coming weeks, Retail Forward said. According to the ShopperScape survey, nearly one of every four back-to-school shoppers (24 percent) plans to spend less on back-to-school merchandise this year, an increase from less than one of every five shoppers (19 percent) that planned to spend less a year ago at this time.

Nearly one of every four back-to-school shoppers (24 percent) plans to spend more on back-to-school merchandise this year, the survey showed. That's down from one of every three shoppers (33 percent) that planned to spend more a year ago at this time.

Like other household spending this year, spending on back-to-school will be hurt by shoppers that are focused on sales items and intent on limiting purchases, the survey suggested.