Retailers felt the pinch of more cautious consumer spending last month, turning in lackluster sales and some warnings about anticipated profit shortfalls.
Slower economic growth, when compared against a more robust environment a year earlier, higher gas and interest costs took their toll on spending in stores.
"We are seeing a soft landing of consumer spending, and in retail sales," said Kurt Barnard, president of Barnard's Retail Trend Report.
The nation's largest chain stores saw sales rise an average 3.3 percent, in line with a revised estimate for slower growth, according to a tally by Bank of Tokyo-Mitsubishi Ltd. That growth was measured against strong August 1999, when sales roseby 6.7 percent.
"It's a reflection of the expansion the whole industry has gone through over the last few years," said Michael P. Niemira, a vice president at Bank of Tokyo. "As such, any kind of slowdown gets accentuated at the [individual] retail level."
"A year and a half ago, the industry was operating on all eight cylinders, by summer it was six, and now operating on four cylinders," he said. "It's going to be more difficult. Some retailers doing well now won't be in six months. Overall demand is slowing, so there are more losers than before."
The slowdown has had a dramatic impact on some individual retailers.
Chains including Target Corp., J. C. Penney Co. Inc., Dillard's Inc. and May Department Stores Co. reported sales figures that fell below expectations.
Target, historically a star performer thanks to its strong Target discount store division, could muster only a lower-than-planned 2.5 percent growth at stores open at least a year.
The real weakness at Target was in its Dayton's, Hudson's and Marshall Field's department store divisions, where sales fell 5.3 percent. The discount stores had a 3.2 percent increase.
Bob Ulrich, Target's chairman and chief executive officer, said the company expects earnings per share to decline in the third quarter "in light of current business trends and the strength of last year's results."
He also warned of lower double-digit growth in fiscal 2000. Target shares dropped 11 percent, or $2.875, to $23.1875.
Sales dipped 6 percent at Dillard's, 3.6 percent at May and 4.5 percent at Penney, which issued an earnings warning and cited larger-than-expected markdowns in its department store and catalog businesses.
In most cases, the hardest-hit chains - mostly department stores and higher-priced specialty chains - rely heavily on apparel sales, which have been sluggish.
"For the apparel retailers, they really hadn't cleared through their spring and summer goods and had a lot of leftovers in the store, which made selling autumn and back-to-school [apparel] difficult," said Thomas Tashjian, managing director of Banc of America Securities.
Shoppers held back on clothing purchases, favored more moderately priced specialty stores or mass discounters, such as Kohl's, or focused on home-oriented merchandise.
"People are shifting their clothing dollars to home-oriented things," Barnard said. "Home enhancement is in."
Even the back-to-school season, which runs through August and the first half of September, hasn't helped so far.
"Back to school, though much discussed at this time of the year, is increasingly a nonevent," Michael Exstein, an analyst with Credit Suisse First Boston Corp. said in a report yesterday. "Consumers continue to buy based on needs, as anticipatory buying has become less relevant."
He said that weakness in apparel sales appears to be extending into the second half of the year and reduced estimates for Dillard's Federated, May, Nordstrom, Saks and Target.
When consumers did spend, they went after home-related goods. Sears, Roebuck and Co., for instance, had one of the stronger showings, with a 5.6 percent sales increase, driven by sales of appliances, lawn and garden equipment and electronics.
One standout was industry leader Wal-Mart Stores Inc., which was behind plan in the early part of August but then came through at the high end of the plan. Same-store sales rose 5.8 percent at its Wal-Mart and Sam's Club stores.
Monthly retail sales
Monthly sales* Monthly YTD sales YTD
pct. change pct. change
AnnTaylor Stores $ 76.6 +3.7% $659.9 +1.6% Federated $1,271.0 +1.1% $9,369.0 +2.3%
The Gap $1,090.0 -14.0% $6,770.0 -4.0%
J.C. Penney $1,129.0 -4.5% $7,500.0 -2.8%
Kmart $2,644.0 +2.8% $19,837.0 +0.7%
Kohl's Corp. $474.5 +9.1% $2,958.5 +7.1%
The Limited $717.5 +6.0% $5,089.0 +7.0%
May Dept. Stores $1,020.0 -3.6% $7,200.1 -0.8%
Men's Wearhouse $82.9 +5.2% $665.3 +5.7%
Sam's Clubs $2,005.0 +5.1% $14,734.0 +5.7%
Sears $2,218.9 +5.6% $16,182.5 +3.1%
Target Corp. $2,742.0. +2.5% $18,480.0 +2.5%
Wal-Mart $12,529.0 +5.8% $90,330.0 +6.4%*In millions