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The mass merchant channel, which has held up better than specialty CE chains against the summer slowdown, is now reporting sluggish sales for August along with some regionals, raising fears that a tepid back-to-school season will augur a soft second half for retailers.
Among full-line discounters reporting an August downturn was Sears, whose total revenue fell 8.7 percent to $2 billion as same store sales slipped 11.1 percent.
While chairman/CEO Alan Lacy again pointed to traffic disruptions due to its ongoing store-remodeling program, the company reported declines in its mainstay home appliance business, which has traditionally been a key sales driver.
Analysts are attributing Sears' white goods downturn to market share gains by Lowe's and an aggressive majap buildout by The Home Depot. Indeed, Home Depot, whose majap sales soared 35 percent in the second quarter, plans to add appliance departments to 258 more stores by year's end, bringing the total to 550 out of 1,300 units.
Observers also suggest that Sears' recent emphasis on national brands may be diminishing the drawing power of its private label Kenmore line.
Also showing weakness, albeit relative to year-ago performance and projected sales growth, was Wal-Mart. Total sales in August were up 11.1 percent to $18.4 billion. But comp store gains of 3.8 percent fell short of last year's 7 percent hike and the company's own lowered expectations for 4-percent to 6-percent growth.
In its weekly sales update, however, Wal-Mart resumed its 4-percent to 6-percent comp sales projection for September, based on stronger traffic than the year-ago period, and cited strength in CE and hardlines categories.
Meanwhile, August sales at Target stores grew 9.6 percent to $2.7 billion while comps remained essentially flat at 0.5 percent growth.
Among the warehouse clubs, Costco saw August sales climb 10 percent to $3 billion and comps climb 6 percent, while sales at Wal-Mart's Sam's Club were up 6.8 percent to $2.4 billion as comps edged up 1.1 percent. Wal-Mart expects Sam's Club comps to improve this month, citing strength in CE and video games, among other categories.
At BJ's Wholesale Club, total sales grew 10.4 percent to $424 million in August while comps slipped nearly 1 percent. According to outgoing president/CEO Jack Nugent, the results reflected "a slower sales trend in higher ticket merchandise including computer equipment, electronics and televisions." Also showing weakness was room air conditioners, while prerecorded media was among categories showing the strongest sales gains, the company said.
Among A/V specialty chains, Good Guys' second-quarter revenue fell 7.4 percent to $177.5 million while same store sales slipped 3.7 percent. The company attributed the declines to the closures of seven stores, stock market volatility and a decline in consumer confidence.
On the positive side, August comps were in the plus column and ahead of plan, and average transaction size and gross profit per transaction increased during the quarter thanks in part to strong demand for high-end TVs and other digital products. "As we enter the second half of the year," said chairman/CEO Ken Weller, "we believe we can continue to improve our quarterly financial performance and attain our goal of returning to profitability."
While RadioShack didn't report this month, chairman/CEO Len Roberts told analysts at a Goldman Sachs retailing conference that the company expects third quarter sales to fall 3 percent to 4 percent, and same store sales to decline between 1 percent and 2 percent due to "the consumer pullback." Nevertheless, he reaffirmed a third quarter profit forecast of 23 cents to 26 cents a share, and said the company is preparing to stock up on DVD players, camcorders, portable audio and other gift-appropriate items in anticipation of improved fourth-quarter conditions.
One bright spot in an otherwise cloudy retail landscape was OfficeMax. The company reported a mid-single digit hike in comp store sales for the first six weeks of the current quarter, which encompasses most of its back-to-school selling season. Indicative of the chain's robust business was word from Intuit that OfficeMax enjoyed the highest combined sales of its Quicken 2003 software suite during its August 25th launch week, the retailer said.
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.