Lowe's, Penney's Post Big Declines In Quarter

by Sarah Mahoney, Feb 20, 2009, 1:40 PM

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Add Lowe's and J.C. Penney to the list, with quarterly results that show just how much shoppers are not shopping these days.

Lowe's says its net income nose-dived 60.3% to $162 million for the fourth quarter of its fiscal year, while sales fell 3.8% to $9.98 billion. Comparable-store sales decreased 9.9%. The company says that its decision to be especially aggressive in price markdowns in the quarter did hurt margins, but improved its inventory position and helped it improve relative to competitors. "Throughout this prolonged industry downturn, we are continuing to capture market share," the Moorsville, N.C.-based company says in its release.

And at J.C. Penney, net income also took a major fall, declining 50.9% to $211 million. Sales declined 9.8% in the quarter to $5.76 billion, while comparable-store store sales skidded 10.8%, despite relative strengths in women's apparel and family shoes. Fine jewelry sales were its weakest segment, the Plano, Texas-based retailer says.

Like other retailers, these companies are struggling to absorb all the ways consumers are changing their shopping patterns. A new report from TNS RetailForward, a Columbus, Ohio-based consulting company, says that while Wal-Mart Stores is a clear winner in these changes, shopper traffic and frequency have fallen in almost every other retail channel.

"As the perception of value becomes increasingly important and the number of value-conscious shoppers seeking out retailers where they can realize the most cost- and time-savings across their whole shopping list grows, the low-price leader Wal-Mart reaps the greatest benefits. The retailer's supercenter format and one-stop shopping appeal allows shoppers to consolidate shopping trips, thereby saving time and gasoline," it says.

Losers include convenience stores, as more than a third of shoppers now buy most of their gasoline at alternative outlets, such as supermarkets, supercenters or warehouse clubs. Surprisingly, warehouse clubs--a format that has gained in popularity as consumers look to cut costs--are also likely to struggle. "Although the leading club players maintained their affluent monthly shopper bases in 2008, further expected cutbacks in discretionary spending, particularly on big-ticket items, won't help the channel going forward," it says.

Shopping frequency at supermarkets declined 3.7% in 2007 to 2008, 2.2% at convenience stores, 3.1% at drug stores, 5% at discount department stores, 2.6% at dollar stores, and 1.7% at warehouse clubs. At supercenters, it increased 0.7%.

The outlook for big-box stores and department stores continues to be dim: Lowe's predicts its comparable store-sales will fall another 6% to 10% in the quarter ahead, and 4% to 8% for the full year. And Penney forecasts that its comparable-store sales will tumble another 12% to 15% in the coming quarter.

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