Retailers Lower Forecasts After Sales Reports

As we have reported here the retail consumer discretionaries are struggling with lower sales due to the consumers' uncertainty of the economy. As we reported we see this Christmas season very weak even with the lowering of interest rates by the Federal Reserve. Interest rates are not the driving force for consumer spending; stability of the income stream is the fundamental variable for consumer, not the S&P 500 Financial Services firms.



Retailers Lower Forecasts After Sales Reports
By MICHAEL BARBARO
Retailers are in for a rough fall.

Across the board, big chain stores reported bleak September same-store sales this morning. As a result, more than a dozen retailers, from Nordstrom to Target, warned of lower-than-expected profits for the third quarter.
In contrast, Wal-Mart Stores raised its third-quarter profit forecast because of cost-cutting, but its September sales figure came in slightly below expectations. Its shares were up almost 4 percent in early trading.
Retailers cited several factors for the overall downturn — a tight credit market, a poor housing market, warm weather and strong performance in September 2006, which made this year’s performance lackluster by comparison.
Those clouds are unlikely to lift before the crucial holiday shopping season, which is predicted to produce the slowest growth rate in five years.
But there will probably be some upside for consumers: retailers are expected to dangle deep discounts to clear fall merchandise in time for the holiday season.
Over all, stores reported a 1.6 percent sales increase in September, below an estimated 2.3 percent gain, according to Retail Metrics, a research firm.
The firm’s president, Ken Perkins, called it a “precipitous decline.”
Sales fell 4.6 percent at J. C. Penney, 2.7 percent at Macy’s and 2 percent at American Eagle Outfitters.
Wal-Mart, the nation’s largest retailer and a bellwether for the industry, said sales rose 1.6 percent, but it said that “customers remain concerned about their finances, especially the cost of living.”
The chief executive of J.C. Penney, Mike Ullman, sounded a similar theme, describing “well-chronicled issues affecting the housing market.”
Several retailers said they would report worse-than-forecast earnings as a result of sluggish sales, including Kohl’s, J.C. Penney and American Eagle Outfitters.