Discounters See Uptick In CE Sales In September

By Alan Wolf -- TWICE, 10/12/2009

New York — Purchases of TVs and computers in September helped drive the first meaningful sales gains in months for discount retailers, suggesting that the freeze in consumer spending may thaw for the holidays.

Nevertheless, falling prices, particularly in CE, squeezed same-store sales and offset the benefits of higher traffic and a favorable calendar shift for Labor Day, which moved pre-holiday sales into September.

Among those reporting September sales, Target said net sales for the five weeks, ended Oct. 3, rose 1.3 percent to $5.4 billion while comp-store sales slipped 1.7 percent, compared with a 3 percent decline last year. The chain attributed the comp-sales decline to a decrease in average transaction size, offsetting an increase in the number of transactions.

CE and commodity goods were among the month's strongest categories, the company reported, while entertainment sales were weaker than average.

“Sales for the month of September exceeded our expectations,” Target chairman Gregg Steinhafel said in a statement, “as the trend in our comparable transactions continued to improve.”

At Costco, net sales for the five weeks, ended Oct. 4, rose 3 percent to $6.9 billion, and U.S. comp-store sales also increased 3 percent, excluding the impact of gasoline deflation.

TV sales were up 35 percent in units and ahead by the mid-single digits in dollars, the company said, and comp sales for Costco's combined CE and appliance business were similarly up by the mid-single digits.

During a conference call, CEO Richard Galanti said CE price deflation has eased from 48 percent last year to a current range of 8 percent to 15 percent, as manufacturers' production and inventory levels fall in line with demand.

Costco also released its fiscal fourth-quarter results, which showed a 6 percent decline in net income, to $374 million, on net sales of $21.9 billion, which decreased 3 percent year over year. Comp sales slipped 1 percent for the period, ended Aug. 30, excluding lower fuel prices.

For the full year, earnings fell nearly 15 percent to just under $1.1 billion, net sales slipped 2 percent to $69.9 billion, and comp sales edged up 1 percent, excluding the impact of gasoline and currency fluctuations.

In a statement, Galanti said the results were negatively impacted by “ongoing softness in U.S. sales, primarily the result of a weak economic environment,” as well as higher health care costs and lower overseas profits due to weaker foreign currencies.

Costco opened eight new stores during the fiscal year, and will open its first Manhattan location, at 116th Street and FDR Drive, next month.

At BJ's Wholesale Club, net sales for the five weeks, ended Oct. 4, rose 4.1 percent to $928 million, and comps climbed 5.5 percent, excluding the impact of gasoline deflation.

TV and computer purchases helped fuel a 5 percent increase in general merchandise sales, although TV price deflation contributed to a 1 percent decline in average transaction amount, the company said.