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Discounters’ September Sales Buoyed By Basics

10/08/2008 11:08:00 AM Eastern

New York — September sales were largely solid for national discount chains, although much of the growth came from basic categories like consumables and healthcare.

Wal-Mart said net sales at its flagship discount stores rose 4.8 percent to $22.5 billion and comp-store sales increased 2 percent for the five weeks, ended Oct. 3, despite the temporary closures of 341 locations due to Hurricanes Gustav, Hanna and Ike.

The company attributed the comp gains to strong sales of grocery, healthcare and apparel products, while sales of discretionary items were soft.

CFO Tom Schoewe said sales also benefited from two first-of-the-month paydays during the September period, reflecting the spending habits of many customers who are essentially living from paycheck to paycheck.

At Target, net sales rose 2.5 percent to $5.3 billion for the five weeks, ended Oct. 4, while comp sales slid 3 percent, reflecting “continued daily volatility,” said president/CEO Gregg Steinhafel.

As with Wal-Mart, sales were largely driven by healthcare and food purchases, while sales of discretionary items declined.

Sales were strongest in the Northeast and weakest in Florida and the Southwest, Target said.

Steinhafel also warned that third-quarter earnings may be impacted by weak retail sales growth and higher net write-off rates in its credit card business.

Among the wholesale clubs, Costco’s company-wide net sales rose 10 percent to $6.7 billion for the five weeks, ended Oct. 5, while comp sales, including fuel, climbed 8 percent.

Costco also reported its operating results for its fiscal fourth quarter. Net income rose 6.8 percent to $397.8 million for the three months, ended Aug. 31, while net sales rose 13 percent to $22.6 billion and comp sales increased 9 percent for the period.

Net income for the full fiscal year rose 18.5 percent to $1.3 billion while net sales grew 12.5 percent to $71 billion and comps increased 8 percent.

At Wal-Mart’s Sam’s Club division, net sales rose 8 percent to $4.4 billion and comp sales, including fuel, increased 7.4 percent for the five weeks, ended Oct. 3. Food and consumables drove the comp-sale increases, said Sam’s Club president/CEO Doug McMillon, while sales were softer in CE, particularly in video games. Exceptions included LCD TVs and personal electronics such as GPS units and digital audio, which performed well, the company said.

“Sam’s Club members continue to search for value in this economy,” McMillon noted. “While discretionary items are under pressure, members are reacting positively to new items. Price is the primary focus, but newness and quality still matter to them.”

At BJ’s, net sales rose 11.8 percent to $892.8 million and comps increased 10.4 percent, including fuel, for the five weeks, ended Oct. 4. Food and computers were among the month’s strongest performers, while CE, including TV, prerecorded video and storage, were among the weakest, the company said.

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