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Company officials say a downturn in tourism has hurt sales at the Largo drugstore chain.
By MARK ALBRIGHT, Times Staff Writer
© St. Petersburg Times, published August 14, 2002
Like many big retailers lumbering through the midsummer doldrums, J.C. Penney Co. Inc. on Tuesday reported a slight sales decrease for the quarter that ended July 27.
The reasons ranged from intentional inventory shortages at JCPenney department stores to soft sales in its Eckerd drugstores because tourism in the state where it has about a fifth of its stores remains in a slump.
"We've got hundreds of stores in Florida tourist areas that have been suffering," said Wayne Harris, chairman and chief executive of JCPenney's Eckerd unit, which is based in Largo. "If it weren't for Florida, our same-store sales increase (excluding the pharmacy counter) would have been 3 percent instead of 1.4 percent."
Penney reported a smaller loss for the quarter of $6-million, or 5 cents a share, compared with a loss of $69-million, or 23 cents a share, in the year-ago quarter. Overall revenues slipped 0.2 percent to $7.2-billion in the second year of the chain's five-year turnaround plan.
Economists looking for evidence of reinvigorated consumer spending had to dig deep into the details of reports issued Tuesday on general merchandise sales.
The Commerce Department said a higher-than-expected 1.2 percent increase in July retail sales was mainly because of auto sales. Bank of Tokyo-Mitsubishi, which tracks 83 big retail chains, reported that an "anemic" 2.6 percent sales increase in July dropped off to a 0.5 percent decrease for the week that ended Aug. 10. Back-to-school sales got off to a slow start, with sales down 1.9 percent in 22,000 stores measured in the National Retail Sales Estimate for the week ended Aug. 10, according to ShopperTrak RCT of Chicago.
"Despite the languid pace of July sales, retailers are still posting encouraging year-over-year increases," said Rosalind Wells, chief economist for the National Retail Federation. "Electronics and appliance stores were up a robust 8 percent year-over-year in July."
Many retailers, however, kept their inventories tight, trimmed expenses and tried to bolster profits by holding the line on prices and keeping the selection in the markdown racks slim. Consumers, meanwhile, kept seeking out bargains.
Analysts said even Wal-Mart Stores Inc. slipped a bit. The nation's biggest retailer reported that net income rose 26 percent to $2.04-billion, or 46 cents a share, up from $1.62-billion, or 36 cents a share in the year-ago quarter. Revenues increased 13 percent to $59.7-billion. Sales in stores open more than a year increased 6.4 percent, but the company said it expected that pace will slow to the 4 to 6 percent range in the current quarter.
"For Wal-Mart, 4 to 6 percent is a bit sluggish," said David Abella, an analyst with Rochdale Investment Management, which holds 120,000 shares of the discount chain's stock.
July is usually slow for retailers. After a decent sales uptick in June, however, many retail chains such as JCPenney chose to enter July with less merchandise rather than risk more price cuts to move unsold goods. That cut into sales as the chain waited until late in the month to stock up for the back-to-school season.
"It's been a challenging quarter," said Vanessa Castagna, chairwoman and chief executive of JCPenney department stores and catalog. "But our operating profits are right on target."
Eckerd almost doubled its operating profit to $73-million, up from $30-million, during the quarter. The drugstore chain accounted for more than three times the $22-million operating profit generated by the parent department store chain.
Same-store sales at Eckerd rose 6.1 percent, propelled by an 8.6 percent gain at the pharmacy counter.
Company officials think Eckerd's performance will continue to improve as more stores convert to a configuration that generates more sales activity. About 1,200 of 2,800 Eckerds have been converted. The rest will be completed by the end of 2003.
-- Mark Albright can be reached at albright@sptimes.com or (727) 893-8252.