American consumers went into hiding last month, leaving retailers including Seattle-based Nordstrom with dismal sales and an uncertain future...
NEW YORK — American consumers went into hiding last month, leaving retailers including Seattle-based Nordstrom with dismal sales and an uncertain future well beyond the holiday season as the fallout from the financial meltdown pushes spending even lower.
As retailers reported their monthly sales figures Wednesday, even discounters weren’t immune to shoppers’ mounting worries about their financial security.
Nordstrom said Wednesday its same-store sales for the five weeks ended Oct. 4 were down 9.6 percent from the previous year, while overall sales were down 5.8 percent.
“In September we experienced a weakening sales trend that was greater than our earlier expectations,” company President Blake Nordstrom said.
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The company now pegs third-quarter same-store sales to decrease 9 to 11 percent, and forecasts quarterly earnings of $0.32 to $0.37, below its previous outlook of $0.49 to $0.54.
“Discretionary spending has come to a trickle,” said Ken Perkins, president of research company RetailMetrics. “Consumers are the most worried I have seen since at least the 1991 recession. There are so many factors laying on their psyche.”
Wal-Mart, the world’s largest retailer, said sales of discretionary items were weak as it posted solid results that were a bit below expectations.
Target fared far worse, reporting a bigger-than-expected drop and said it expects problems with its credit-card business to last through the rest of the year as customers have trouble making payments.
Luxury stores such as Saks suffered sharp drops. Many mall-based apparel stores and department stores including J.C. Penney find themselves mired in a deep sales slump.
Issaquah-based Costco was one of the few bright spots, announcing a 7 percent gain in same-store sales Wednesday, albeit just below the 7.5 percent estimate. Excluding gasoline price inflation, same-store sales would have been up 6 percent.
Wal-Mart offered a tepid sales outlook as it reported a 2.4 percent gain in same-store sales, just missing expectations. The company said it was hurt by having to temporarily close 341 stores because of hurricanes Ike, Gustav and Hanna. Wal-Mart said it expects same-store sales at its U.S. stores to be up from 1 to 2 percent for this month.
The company said September same-store sales were strong in both grocery and health and wellness and that customers continue to look for basics.
Target, which has struggled because of its heavy emphasis on nonessentials such as fashions and home furnishings, reported a 3 percent drop in same-store sales, worse than expected. It also cut its third-quarter outlook.
Desperation has set in as the critical holiday season approaches. From discounters to luxury stores, merchants have begun cutting holiday orders in recent days, even as goods start to flow into stores, according to Arnold Cohen, co-founder of Mahoney Cohen, an accounting firm for the apparel industry. And many companies are delaying spring orders amid so much uncertainty, Cohen said.
Analysts and store executives expect spending could deteriorate even more as the problems on Wall Street filter through the economy, with layoffs expected to rise and the credit markets remaining frozen. That means consumers are having a hard time getting loans and credit lines. That’s adding to more stress for shoppers, who were already contending with high gas and food prices and a slumping home-sales market.
“Weakness in consumer spending is a significant drag on overall economic activity,” said Scott Hoyt, senior director of consumer economics at economy.com, who now predicts declines in consumer spending, adjusted for inflation, through the first quarter of 2009. “We are on track for something longer and deeper than either of the previous recessions.”