Drug store chains and other mass retailers are hoping that better days are ahead after scratching out a slim sales increase in November.


drug store, mass retailers, holiday sales, November, retail trade sales, Bill Dreher, Deutsche Bank Securities, Todd Slater, Lazard Capital Markets, Retail Forward, Frank Badillo, Brendan Langan, MVI, Russell Redman, Rosalind Wells, National Retail Federation, NRF, Commerce Department,






































































































































































































































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Retail News Breaks Archives

Retailers cross fingers for holiday sales lift

December 14th, 2009

NEW YORK – Drug store chains and other mass retailers are hoping that better days are ahead after scratching out a slim sales increase in November.

Same-store sales (excluding Wal-Mart Stores Inc.) for the month were up 0.9% year over year, down from a 2.3% increase in October, according to Retail Forward. However, the market research firm, which tracks monthly sales at about 30 retail chains, noted that although November's improved on the 7.7% decline in November 2008 (or a 2.5% decrease including Wal-Mart).

Food, drug and mass retailers and apparel and accessory stores fared best in November, while department stores lagged, Retail Forward said.

According to advance figures from the Commerce Department, November retail trade sales rose 1.4% from October and 2.2% from November 2008. Health and personal care stores, including drug stores, saw a year-over-year sales gain of 4.5% in November, while month-to-month results were down 3.4%. The only other non-automobile categories to post year-over-year increases in November were general merchandise stores (+1.2%) and nonstore retailers (+11.4%), which includes online, catalog and mail-order retailers.

Meanwhile, the National Retail Federation (NRF) reported a 0.8% year-over-year drop in retail sales for November but said seasonally adjusted results inched up 0.6% from October.

Industry observers had mixed views about November's results. Some wondered why the comparisons with last year's dismal performance didn't produce decent gains during the month this year, while others noted that the retail sector should be glad to be in positive territory, given the still foggy economic climate and wary consumer.

"Despite the month of November having the easiest compares of the year, every subsector of broadline retailing missed consensus expectations, including discount stores, warehouse clubs, drug stores and department stores," analyst Bill Dreher of Deutsche Bank Securities said in a research note on November retail sales.

"The overall takeaway has to be incrementally negative," Dreher added. "Unless Wal-Mart achieved some surprisingly massive market share gains across all of these subsectors of retailing, [November's] widespread sales weakness is a negative indication on overall consumer spending."

Analysts cited unseasonably warm weather, deflation in such categories as food and electronics, and a smaller shopper basket as among the factors hampering sales in November.

"Retailers reported turkey top-line numbers this month, as consumers couldn't justify ‘easy comparisons’ as a catalyst to shop," Todd Slater of Lazard Capital Markets wrote in a November retail sales analysis.

Sales lagged early in the month and picked up for the Black Friday weekend — though less than what many retailers had hoped, analysts said. They noted that sales on Cyber Monday — the day after the Thanksgiving weekend, when online purchases typically surge — were strong this year. Drugstore.com, for one, said it recorded its heaviest customer-order volume ever on Cyber Monday this year.

"Retailers stepped up efforts to entice shoppers earlier this year with more targeted messaging," explained analyst Brendan Langan of retail research firm MVI. "These efforts fell in large part on deaf ears, as shoppers took advantage of advanced notice to do their homework, sharpen their lists and seek out the best deals."

Still, retail observers were encouraged for the coming weeks by robust customer traffic in November.

"Shoppers continue to give signs that they are ready to loosen the grip on their spending plans, but at the same time remain very cautious and deal-focused in their spending," stated Frank Badillo, senior economist at Retail Forward.

Retailers planned ahead this holiday season by rolling out aggressive discounts and keeping inventory in check, according to NRF chief economist Rosalind Wells. "Retailers are encouraged to see momentum building in sales as they prepare for the final 10 days before Christmas," she commented.

Weak front-end sales squeezed results at drug chains. Walgreen Co.’s November same-store sales rose 3.9%, down from a 4.9% gain the previous month, while comparable-store results at Rite Aid Corp. in November fell 0.8%, compared with a 0.5% dip in October. CVS Caremark Corp. no longer reports monthly sales results.

Among other key mass retailers, Target Corp. saw November same-store sales slip 1.5%, in contrast to a 10.4% drop in the prior-year period. Discount general merchandise chain Fred’s Inc. posted a 3.3% comparable-store sales decrease in the month, down from a 1.8% dip in November 2008.

Pointing to a positive impact from fuel price inflation and foreign exchange, Costco Wholesale Corp.reported a comparable-club sales gain of 6% (2% excluding fuel business) in November. Rival BJ’s Wholesale Club Inc., meanwhile, generated a 1% same-store increase.

"Yes, Virginia, Christmas will come in December," Lazard Capital's Slater remarked. "November was negatively impacted by procrastinators, unseasonably warm weather in the U.S. and Canada, and less inventory to discount. We think December sales trends will improve and probably exceed what we expect will be more rational (and lower) expectations than November."

Retailers will benefit from an extra pre-Christmas selling day in December this year and should see higher margins, he added. "Fourth quarter earnings will likely continue to remain strong and not miss expectations, despite what seems to be a weak start to the holiday season from a revenue perspective."

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