Retailers' Sales Support Averages

Elena
06 Oct, 2005
New York City

In a day of retail companies same-store sales reports, a few stand out with heavy gains. Target posted 5.6% same-store sales increase in September, meeting its projections. Wal-Mart posted September comparable sales rise of 3.8, followed by BJ's Wholesale, also reporting same-store sales increase of 3.8%. Costco posted 20% net income rise for the fourth quarter with earnings of 73 cents a share on higher revenue, beating expectations.

U.S. MARKET AVERAGES

In a day of heavy retail sales reports, the stock markets have been trading mostly in the positive with the Nasdaqf presently ractionally higher and the Dow and S&P 500 up by 0.3%. Six of the ten economic sectors post gains. The market sentiment was lifted by the promise of steady profits from General Electric Co. and September retailers’ sales reports which painted a mixed picture but proved better than previously expected.

Two major companies released upbeat data. Retailer Costco ((COST)) posted Q4 20% earnings rise of 73 cents a share on higher revenue, beating estimates. Wal-Mart ((WMT)), the world's largest retailer, revealed that its September comparable sales rose 3.8% from last year. For October, Wal-Mart projected comparable store sales growth of 2%-4%. The company reaffirmed its Q3 earnings guidance of 55 to 59 cents per share.

Limited Brands revealed a 2% decline in September comparable store sales, Sharper Image ((SHRP)) announced a 21% drop, Factory Card & Party Outlet ((FCPO)) reported a 0.4% slide and The Buckle ((BKE)) posted a 1.4% decline. Talbots ((TLB)) reported lowered 2005 earnings outlook and a 5.1% decline in its September comparable store sales. New York & Co. ((NWY)) cut its full-year guidance and posted 0.4% in comparable store sales.

In addition, another slip in oil prices helped shares move up in the early going. Light, sweet crude is down $1.29 at $61.50 per barrel. The good news helped investors overlook another rise in first-time jobless claims, which rose to 390,000 last week, an increase of 21,000 from the week before. The Labor Department said as many as 363,000 people were out of work due to Hurricanes Katrina and Rita.

Airline stocks have posted steady gains throughout the session, pushing the sector up 4.5% to reach its highest level in more than 3 weeks. Shares of railroad and trucking stocks are strong as well, posting gains about 1.5%.

Positive Q3 earnings forecast from General Electric sent the Industrial sector up 1.2%.

With the help of upbeat same-store sales reports from Wal-Mart,Target and Costco the retail sector has been in the positive, currently up by 1.2%. Strength in bank stocks and broad buying the Financials sector is posting gains of nearly 1%.

The energy sector is a notable decliner, falling about 1% and 9.2% on the week, reflecting further declines in oil prices. Elsewhere, there are some modest losses coming from the semiconductor, Internet and biotech sectors.

MOVERS AND SHAKERS

Dow component Merck ((MRK)) jumped 4.7% after it was announced that a study indicated effectiveness of a company anti-cancer vaccine. The experimental vaccine showed success in pivotal studies, preventing nearly 100% of growths that can lead to the deadly disease. The vaccine is aimed at four types of the human papillomavirus, or HPV.

General Electric ((GE)), also a Dow component, was up 1.1% after the company said its third-quarter earnings will be at the top of its expected range, and also increased its range for 2005 earnings to $1.81-$1.83 a share, from previous outlook for $1.80-$1.83 a share. General Electric said it would earn 44 cents a share, matching the analysts forecast. The company’s previous forecast was for income of 43 cents to 44 cents a share.

Retailer Wal-Mart ((WMT)) added 0.7% after the company posted a 3.8% increase in September same-store sales, equal to its expected results. Another retailer Target ((TGT)) also upped 0.6% after it reported same-store sales near the top expectations. The company said September sales rose 5.6% at stores open at least a year, and it maintained its profit forecast for the rest of the year.

Retailer Kohl's ((KSS)) is also likely to be active but in the opposite direction due to the news of a 0.2% decrease in monthly same-store sales. The company was disappointed with sales of cold-weather products. The company backed its third-quarter earnings forecast of 43 cents to 46 cents per share, and said it expects a shift in weather-related demand into October.

Federated Department Stores ((FD)) dropped 4.7% after the U.S. biggest department store chain said that same-store sales were below its target of 2% to 3% growth due to lost sales from stores closed because of Hurricanes Katrina and Rita and other factors.

ECONOMIC NEWS

Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended October 1, showing an unexpected increase. The report may raise some concerns about the strength of the monthly employment report due to be released on Friday.

The Labor Dept. said that jobless claims rose to 390,000 from the previous week's upwardly revised figure of 369,000. Economists had expected jobless claims to decline to 350,000 from the 356,000 originally reported for the previous week.

The report also showed that the 4-week moving average rose to 404,500 from the previous week's upwardly revised average of 388,750. This marks the eighth consecutive increase for the less volatile 4-week moving average.

Additionally, the Labor Dept. also said that continuing claims in the week ended September 24 rose to 2.905 million from the preceding week's revised level of 2.787 million.

As mentioned above, the Labor Dept. is due to release its September employment report on Friday, with economists expecting the report to show that the U.S. economy lost 150,000 jobs in September. The decrease is expected to reflect the impact of Hurricanes Katrina and Rita.

INTERNATIONAL MARKET NEWS

All Asian-Pacific benchmarks closed in the red, posting heavy losses on sharp declines of U.S. equity markets. The Japanese Nikkei was the biggest decliner, down 2.4% with Kyocera, Honda Motor and Fanuc among the leading losers. Across the region, South Korea’s Kospi fell 2% with decliners including Samsung Electronics and Posco, Hong Kong’s Hang Seng tumbled 2.1%, and Australia’s All Ordinaries was down 2.1%. The dollar bought 113.97 yen.

European markets finished in the red, reflecting U.S. inflation concerns. Interest-rate decisions also weighed on the sentiment. The Bank of England decided to leave the rate at 4.5%, followed by the European Central Bank which left the key rate unchanged at 2%. The German DAX 30 lost 1%, the French CAC 40 fell 1.3%, and London’s FTSE 100 slipped 1%.

ENERGY, METALS, CURRENCIES

Oil prices dropped to a two-month low, reflecting signs of weakening U.S. gasoline demand due to high pump prices. Light sweet crude for November delivery lost $1.29 to trade at $61.50 a barrel on the Nymex. Heating oil dropped 7 cents to $1.945 a gallon. Gasoline futures slid 8 cents to $1.83 a gallon. Natural gas prices fell by 41 cents to $13.77 per 1,000 cubic feet. London Brent lost $1.58 to $58.54.

Gold prices climbed in European trading on the back of a weaker dollar. In London the precious metal traded at $466.30 per troy ounce, down from $464.10. In Hong Kong gold fell 50 cents to close at $466.15. Silver opened at $7.42, down from $7.33.

In European trading the U.S. dollar declined against its major counterparts. The euro was quoted at $1.2054, up from $1.1954.The dollar changed hands at 113.78 yen, down from 113.93.The British pound was trading at $1.7674, up from $1.7630.

EARNINGS NEWS

Costco Wholesale Corp. ((COST)), retailer, reported a Q4 profit rise of 19.5% to73 cents a share on 10.3% revenue growth and announced its intentions to buy back another $1 billion in shares. The company said the quarter included 7 cents in tax benefits; apart from those benefits, its earnings of 67 cents topped analysts’ forecasts of 64 cents a share. Comparable sales increased 11% in September, with overall sales up 13% to $5.14 billion.

Marriott International Inc. ((MAR)), lodging industry operator, reported 12% Q3 net income rise to 65 cents per share, beating the analyst estimate by a penny, and up from 56 cents per share in the year-ago period on revenue growth at the company's hotels, boosted by higher room rates. The latest quarter incorporated a charge of 5 cents per share for writing down the value of the company's investment in a Delta Air Lines leveraged aircraft lease. Excluding the charge, net income was 70 cents per share.

ATI Technologies, Inc. ((ATYT)), graphics chipmaker, reported a Q4 loss of 41 cents a share on revenue decline from $60 million from the Q3 to $470 million, missing the analysts’ forecasts for a loss of 30 cents a share. Excluding one-time items, the company reported a loss of 12 cents a share.

CORPORATE NEWS

Goody's Family Clothing ((GDYS)) has reached an agreement to be acquired by an affiliate of Sun Capital Partners for $8.00 per share in cash. The company said it expects a definitive agreement within the next 48 hours. Separately, Goody's reported a 5.5% drop in September same-store sales.