June sales at reporting mass market retailers were disappointing and executives pointed to a variety of factors that shaped results.

June sales, Target Corp., Thomson Reuters, Gregg Steinhafel, Costco Wholesale Corp., Duckwall-ALCO Stores Inc., Rich Wilson, Fredís Inc., Bruce Efird, Walgreen Co., Walgreens, Express Scripts Inc., Rite Aid Corp.

Other Services
Reprints / E-Prints
Submit News
White Papers

Retail News Breaks

Mass retail sales in June disappoint

July 5th, 2012

NEW YORK – June sales at reporting mass market retailers were disappointing and executives pointed to a variety of factors that shaped results.

Target Corp., for example, posted a 2.1% increase in comparable-store sales that fell short of the 2.4% average forecast among analysts surveyed by Thomson Reuters. "Following better-than-expected performance in May, our June comparable-store sales were near the low end of our expected range,” said Gregg Steinhafel, chairman, president and chief executive officer. “We believe these results, combined with our outlook for July, keep us on-track to deliver second-quarter sales and adjusted earnings per share in line with the guidance we provided at the time of our first-quarter earnings release."

At Costco Wholesale Corp. company-wide sales on a comparable-store basis rose 3%, led by a 3% increase at the company’s domestic warehouses. International warehouses, which reported a 2% rise, were negatively affected by a stronger U.S. dollar, particularly against the Mexican peso and the Canadian dollar.

Analysts on average expected a 3.7% increase, including the impact of fuel prices and foreign exchange. Excluding those factors, adjusted comparable-store sales expanded 5%, with international warehouses generating an 8% improvement and domestic units producing 3% growth. It was the fourth monthly miss in a row for Costco.

At Duckwall-ALCO Stores Inc. June sales from continuing operations (excluding fuel) fell 2.9% to $46.8 million, as same-store sales excluding fuel declined 5.9%. "Although we had expected June to be a challenging month due to the fiscal calendar shift, sales were disappointing," said president and CEO Rich Wilson. "Unlike the prior year, customer shopping patterns shifted out of the June fiscal period due to the timing of the first few days of July and the Fourth of July shopping weekend."

Memphis-based regional discounter Fred’s Inc. reported a 4% decline in comparable-store sales that management blamed in part on an unexpectedly sharp impact from generic drug introductions as well as calendar shifts. "Although we anticipated slightly negative comparable-store sales for June, primarily due to the unprecedented size of the brand-to-generic shift in pharmacy sales now underway, typical sales patterns for these kinds of transitions did not occur," said CEO Bruce Efird. "Historically, market changes occur over a period of six to nine months. However, in the most recent conversions, the changes occurred over a period of 30 to 45 days. Clearly, the impact of generic pricing on the major brand conversions was more dramatic than we projected."

Efird added that general merchandise sales were disappointing early and late in the month, affected by weather, calendar shifts and the effect of holidays. Executives now expect July comparable-store sales to range between flat and a 3% decrease, while second-quarter earnings are now projected to come in at the lower end of management’s guidance of 15 cents to 17 cents per share.

Among drug chains, Walgreen Co. also took a hit from generic intros, but the main damage was once again a result of the retailer’s impasse with Express Scripts Inc. Total sales at Walgreens fell 6.8% to $5.63 billion, while comparable-store results plunged 10%, driven by a 15% drop in comparable-store pharmacy sales.

The steep drop in Rx comp-store sales reflected an 11.9% decrease in script count. According to management, calendar day shifts during the month had a negative impact of 2.3 percentage points on script count, while the chain’s absence from the Express Scripts’ network carved 10.7 percentage points from comp-store script count.

Management estimated that comparable-store pharmacy sales also reflected a negative impact of 5.8 percentage points from generic introductions over the last 12 months as well as a 2.3% hit from calendar day shifts. The ongoing dispute with Express Scripts deleted 10.7 percentage points from comp-store Rx sales.

Although total front-end sales edged up 0.5%, on a comp-store basis results fell 1% as a 2.3% drop in customer traffic more than offset a 1.3% increase in average transaction.
Rite Aid Corp. experienced a milder June swoon, but total sales still dipped 1.6% to $1.92 billion, as same-store sales fell 1%. The front end eked out a 0.3% gain, but Rx sales on that basis decreased 1.6%, including a negative impact of 672 basis points from new generic introductions. According to the company, the prescription count at comparable-stores increased 2.9% during the month.

More Retail News Breaks >>