Sector snap: Citi sees weak back-to-school season

[August 07, 2012]  NEW YORK (AP) -- A Citi analyst said Monday that she expects this back-to-school season to be the softest since 2009, citing a lack of compelling fashion trends and the potential that consumers will stick to buying just the basics amid concerns about the broader economy.

In a note to investors, analyst Deborah Weinswig forecast sales at established stores to be flat to up 2 percent for the August-to-September period. Not including the 2009 season, Weinswig said that would make it the weakest season since 1997. The forecast is also well below the 10-year average of 4.4 percent growth, she said.

"We expect consumers to focus on buying the basics at the best price and pass up discretionary purchases to save money," Weinswig wrote.

In addition to slower mall traffic and stiffer competition from online outfits such as Amazon, Weinswig noted that retailers are up against a tough comparison from last year, when sales at established stores rose 6.6 percent.

Revenue at stores open at least a year is a key measure of retailers' health, because it strips out the volatility of newly opened or closed stores.

Weinswig selected Wal-Mart Stores Inc. as her top performer, given its focus on value. She noted that the big-box retailer has made "great progress" in gaining market share in clothing, particularly with basics like socks and underwear.

She also said discounters that have a large school supplies business are more at risk from competition from online retailers, while department stores that sell clothing are more insulated since parents typically want their kids to try on clothes before buying them.

Among retailers, Weinswig expects Costco and Nordstrom to perform relatively well, with growth of 5 percent and 5.7 percent, respectively for the August-to-September period. Kohl's and Walgreen's are expected to show the weakest performance, with sales growth of 1.5 percent and a decline of 8.5 percent, respectively.

In afternoon trading, shares of Wal-Mart Stores edged down 5 cents to $74.50.

Costco Wholesale Corp. slipped 50 cents to $96.71, while Nordstrom Inc. gained 43 cents to $54.78

Kohl's Corp. shares added 74 cents at $51.85, and Walgreen Co. rose 20 cents to $36.

Elsewhere in the sector, Macy's Inc. gave up 27 cents to $36.99, and Target Corp. added 17 cents to$62.53.

[Associated Press]

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