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More Bad Sales Results

Target, Lowe’s and Saks weigh in with troubling quarters



Three retailers who have made the designs of their stores a major part of their strategies reported quarterly profit and revenue declines.

Target Corp. (Minneapolis) said profits dropped 24 percent in its most recent quarter ending Nov. 1, 2008. The retailer blamed the sharp pullback in consumer spending and weak results from its credit-card segment contributed to its drop in earnings. Revenue fell to $15.11 billion from $18.4 billion last year, falling short of the $15.24 billion analysts expected. Sales were helped by new-store expansion, but that was offset by a 3.3 percent drop in same-store sales.

Target has cut its 2009 expected capital expenditures by $1 billion. “The current environment and our financial outlook have naturally reduced our appetite for investment in our business,” said cfo Doug Scovanner said in a statement.

Target ceo Gregg Steinhafel said that the results “reflect the significant macroeconomic challenges facing our retail and credit-card segments.”

Discounters such as Target and its chief rival, Walmart Stores Inc. (Bentonville, Ark.), have benefited somewhat as consumers trade down and hunt for bargains, but Target has been helped less by this trend since more than 40 percent of its revenue coming from nonessential such as trendy fashions and housewares.

Lowe's Cos. Inc. (Mooresville, N.C.) cut its full-year forecast as the deepening economic crisis led homeowners to put off big-ticket purchases. The retailer also forecast profit for the current quarter below Wall Street estimates, saying rising unemployment, falling home prices and tight credit would continue to pressure its business.


Lowe's earned $488 million for its third quarter ending October 31, 2008, down 24 percent from $643 million. Sales rose 1.4 percent but same-store sales fell 5.9 percent.

Both Lowe's and The Home Depot Inc. (Atlanta) have posted weak results and cut their store growth as the U.S. housing slump and tight credit curtail demand for home improvement projects and big-ticket goods such as appliances.

Lowe's said sales weakness in the last week of October continued into November as economic conditions worsened. “We expect continued, broad-based external pressures on our industry, as rising unemployment, falling home prices, tight credit and volatile equity markets continue to erode consumer confidence and impact sales,” said chairman Robert Niblock.

Saks Inc. (New York) lost $42.8 million in its third quarter ended Nov. 1, 2008, compared with a profit of $21.6 million a year ago. (The loss included $10.6 million of expenses related to the shuttering of its unprofitable Club Libby Lu.) Same-store sales fell 11.5 percent.

“I don’t think anybody’s doing well in this environment,” said chairman and ceo Stephen Sadove. “Clearly, our consumer doesn’t feel wealthy.”

As a result, the store is cutting back on spring orders, cost-cutting efforts are being intensified, capital expenditures are being slashed and every brand is now subject to intense scrutiny that could lead to eliminations. Chief merchant Ron Frasch said the climate may result in some tough decisions regarding merchandising. “We have to make sure that we only invest and focus on business categories that yield strategic and financial value to the business,” he said. “Categories that do not fit through this filter will be eliminated, [and] we must make the hard decisions on a brand by brand basis.”




MasterClass: ‘Re-Sparkling’ Retail: Using Store Design to Build Trust, Faith and Brand Loyalty

HOW CAN WE EMPOWER and inspire senior leaders to see design as an investment for future retail growth? This session, led by retail design expert Ian Johnston from Quinine Design, explores how physical stores remain unmatched in the ability to build trust, faith, and loyalty with your customers, ultimately driving shareholder value.

Presented by:
Ian Johnston
Founder and Creative Director, Quinine Design

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