Retailers Continue To Pay The Price For The Gas Crisis
Thursday, July 10, 2008SUSIE GHARIB: The latest monthly sales numbers from the nation's retailers show the pressure facing American consumers, as soaring gas prices dominate spending choices. Discounters fared the best last month: sales at Wal-Mart rose nearly 6 percent, while wholesalers Costco (COST) and BJ's (BJ) reported strong gains on sales of gasoline. Target (TGT) didn't do as well as its discount rivals. Its sales rose just 0.4 of a percentage point. Among clothing retailers teen retailer Aeropostale (ARO) and Children's Place (PLCE) posted double-digit gains. J.C. Penney (JCP) and Gap Stores (GPS) continued to struggle. As Scott Gurvey reports, analysts say the retail sales picture may get worse before it gets better.
SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: There is a clear divide in the retail sector where success is being determined by the product mix and little else. Analyst Deborah Weinswig of Citi says one product is a sure winner.
DEBORAH WEINSWIG, RETAIL ANALYST, CITI: If you sell gas, you're doing extremely well, because you're driving traffic. Because theoretically if you're one of the retailers I follow, you're selling cheaper gas than the gas station on the corner of Main and Main.
GURVEY: Other products bringing profits are food and other necessities which are driving traffic to wholesale clubs and discounters. But for sellers of discretionary items in these difficult economic times, it is a completely different story.
WEINSWIG: If you're a high end retailer these days, you're probably in one of the worst positions because we are really seeing people really kind of clamp down on discretionary spending. So it really is kind of very barbelled in terms of what you're seeing out there.
GURVEY: Shoppers are increasingly price-driven. Arthur Rubin of Staten Island traveled to Wal-Mart in New Jersey.
ARTHUR RUBIN, SHOPPER: We usually shop at shop at ShopRite in the city. The difference in savings is about $1.75 to $2 on an item, and that's unbelievable.
GURVEY: Analysts do not expect to see much from back-to-school sales. They say parents will cut back. Analysts also see reduced demand as consumers like Marla Toro of Union City finish spending their economic stimulus checks.
MARLA TORO, SHOPPER: I thank the government for that money. That's something that we wasn't expecting, you know?
GURVEY: The prospects for holiday sales, when most retailers do more than half their annual business, are equally bleak. On Wall Street, the retail sector has been battered and stock prices are cheap. But analyst Brian Tunick of JPMorgan says investors are making a rational decision by being negative.
BRIAN TUNICK, SPECIALTY RETAIL ANALYST, JPMORGAN: You can clearly see the investors who have to actually make those decisions, they're very bearish. We've never seen sentiment like this. I've never seen sentiment like this before. And they continue to push on the short interest higher and higher. So they're selling into every rally and they're trying to short as much as they can.
GURVEY: Flat screen televisions are another product still selling. Analysts say people who have decided on stay-at-home vacations are buying the TVs for entertainment. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.
