Chain Store Sales Horror

By Markos N. Kaminis - Economy and Markets

Wall Street Greek reports on Chain Store Sales each month, so please visit our front page to see the latest news. --- Chain Store Sales, also known as Retail Same-Store Sales, have been broadly reported for the month of September over the past couple of days. Not surprising a soul, the news has been mostly horrid.

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First, Let's Recall Why Sales Suck

If there was any doubt why Chain Store Sales were so horrid in September, ancillary reports today should have cleared that up. First of all, Weekly Initial Jobless Claims were reported at 478K for the week ended October 4th. While that figure was down from the prior week's result, the more important four-week moving average rose 8,250, to 483K. That average composes a period mostly including sad September days. Also, in absolute terms, the weekly figures have been far too high for comfort (close enough to kiss 500K).

If you need a more direct knock in the head, the RBC CASH Index, a measure of consumer sentiment, was cut in half in October. CASH is not cash in this instance; the acronym stands for Consumer Attitudes and Spending by Household. As might have been imagined in nightmare, the index fell 32 points, to a level of 37. That death-dive marked the largest single monthly decline since the index's inception way back in 2002.

Taking Stock

More bad news came in the form of Wholesale Inventory build. In these times of superior "just-in-time" processes, inventory has been well managed in relation to sales. However, when the global economy falls off a cliff, it looks like all bets are off and the machine blows up. Wholesale level inventories built 0.8% in August, and stood 11.1% above prior year levels. Sales fell 1.0% from July, but were 13.4% higher than prior year levels, greatly impacted by petroleum prices. Durable Goods sales fell 1.5%, and Nondurables fell 0.6% from July. Inventory-to-Sales increased to 1.10 from 1.08. Okay, you didn't need all that info to know things are getting tougher.

Chain Store Sales Horror

We did more prognosticating last weekend than just our Federal Reserve rate cut call: "What seemed a bad idea just a few weeks ago, now appears a necessity; and that's yet another Federal Reserve rate cut. I think we need a 50 basis point cut here to further encourage business activity and help drive a favorable yield curve for banks... The ECB at least considered a cut last week, and I expect they will also issue an emergency cut soon enough. The Banks of Japan and England both issue rate decisions this week, and I would not be surprised to see cuts from both."

We've also been talking about a coming (now current) decimation to the retail/restaurant/commercial real estate sector for over a year now. I think the little girl in Poltergeist said it best when she uttered the words, "They're here...." Decimation is upon us and desolation is to come, that being to the commercial real estate space. In my own neighborhood, I've already noted more than a scattering of empty stores seeking new renters. Speaking of my hood, a shout out to all my trucker and barge pilot readership; after asking you to honk your horns when passing 81st and 1st (and 81st on the East River), you came out in force. I want you to know I hear ya! However, I think my neighbors would prefer you limit the Saturday morning horn blowing, and thank God they don't know it's because of me! Could you also drop a dollar in my mailbox?

September Sales

Stores like The Gap (NYSE: GPS) (-11%), Abercrombie & Fitch (NYSE: ANF) (-14%), Stage Stores (NYSE: SSI) (-13.6%), Pier 1 (NYSE: PIR) (-11.7%) and Chico's (NYSE: CHS) (-15.6%), fared worst. The big boys in Target (NYSE: TGT) (-3%), J.C. Penney (NYSE: JCP) and Wal-Mart (NYSE: WMT) reported sales yesterday, and for the most part fared no better.

Discounters clearly outperformed department stores, and we even saw some hit born by high-end retailers this time, including the likes of Neiman Marcus (-12.9%) and Saks (NYSE: SKS) (-10.9%). Wal-Mart was one of the discount winners, as it managed to post a sales increase of 2.4%. The less popular TJX Cos (NYSE: TJX) only gave up a percentage point in September.

Thomson Reuters reports that overall same-store sales rose just 0.8% in September. That was far short of the 1.9% sales managed for the year through August. Also, if you pull industry-leader Wal-Mart out of the group, sales fell 0.9% in September.

Rare big winners included American Apparel (NYSE: APP), which posted a 15% sales gain and The Buckle (NYSE: BKE), which saw a 19.7% rise. Some of others to note included Hot Topic (Nasdaq: HOTT) (-2.9%) and Zumiez (Nasdaq: ZUMZ) (-9%). Seems teen allowance earnings is on the slide along with everything else.

US department stores have fared poorly for a while now, and the group's sales likely fell 7.2% in the third quarter. Ross Stores (Nasdaq: ROST) sales, for one, declined 2%. This ongoing saga deserves more than one article to detail our forecast, so stay tuned.

Please see our disclosures at the Wall Street Greek website and author bio pages found there.