Inside This Issue - News
June sales are disappointing
July 23rd, 2012
NEW YORK – Americans spent less at retail businesses for the third straight month in June.
According to a Commerce Department report released earlier this month, spending during June fell in nearly every major category.
Overall, retail sales slid 0.5% from May to June, the Commerce Department said, and mass market retailers reported only slightly better results for the month.
Retail sales had not fallen for three straight months since the fall of 2008, at the height of the financial crisis.
Executives pointed to a variety of factors that they feel dragged down sales.
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," chairman, president and chief executive officer Gregg Steinhafel said. "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."
Meanwhile, at Costco Wholesale Corp. companywide 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, marking the fourth consecutive month that Costco failed to meet Wall Street’s projections.
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%.
At Memphis-based regional discounter Fred’s Inc. comparable-store sales dipped 4% during the month. Executives blamed the decline on an unexpectedly sharp impact from generic drug introductions and the failure of a shift in sales patterns to compensate for the transition from branded drugs to generics to materialize.
"Historically, market changes occur over a period of six to nine months," CEO Bruce Efird said. "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."
Among drug chains, Walgreen Co. also took a hit from the massive rollout of generics. However, that was only part of the story, as the retailer’s impasse with Express Scripts Inc. continued to take its toll.
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 sharp decline in pharmacy comps reflects an 11.9% decrease in script count, with the bulk of that (10.7%) coming from the chain’s absence from the Express Scripts network.
June was not quite as bad at Rite Aid Corp. Still, total sales dipped 1.6% to $1.92 billion, and same-store sales fell 1%.
The front end eked out a 0.3% gain, but prescription sales on that basis decreased 1.6%, including a negative impact of 672 basis points from generic introductions.