Retail giants in trouble as sales fall
More gloomy news expected in this week’s earnings reports
The Saks luxury retail chain, the latest U.S. retailer to announce a move into Canada, Monday posted a loss in the second quarter, joining a long list of stores struggling through 2013.
With companies including Target Corporation, Best Buy Company, The Home Depot Inc. and Sears Canada scheduled to report earnings this week, analysts are expecting more bad news for shareholders.
Saks lost $19.6 million (U.S.), or13 cents per share, for the three months ended Aug. 3. That compares with a loss of $12.3 million, or 8 cents per share, in the same period last year.
Saks has agreed to a friendly $2.4-billion takeover offer from Hudson’s Bay Co. that will see some Bay stores in Canada transformed into Saks locations.
Saks chairman and CEO Stephen Sadove said in a statement that increased markdowns were a contributing factor to the disappointing returns.
“I wouldn’t expect too many retailers to be blowing the doors off last year’s sales,” said Jeff Doucette, founder of Sales is Not Simple, a retail consulting firm based in Calgary.
Statistics Canada released figures Monday that showed sales declines in most categories for large retailers in Canada in June 2013 over June 2012.
Women’s clothing and accessories were down 4.5 per cent in June over the previous June. Men’s clothing and accessories were down 2.9 per cent and footwear was down 2.9 per cent. Home electronics, computers and cameras were down 8.9 per cent. Toys, games and hobby supplies were down 19.5 per cent.
Indoor furniture and lawn and garden products made small gains and household appliances gained 2.2 per cent.
The Statistics Canada survey includes the largest food, clothing, home furnishings, electronics, sporting goods and general merchandise retailers in Canada, including department stores, representing about 35 per cent of annual retail sales.
The retailers are facing a combination of increased competition and consumers made cautious by too much debt.
“I think they’re (retail earnings) going to be soft for sure,” said Maureen Atkinson, a senior partner at J.C. Williams Group, a global retail advisory firm.
Although Target reported a surge in sales when the stores first opened in Canada, public enthusiasm may have dropped off, according to the data firm Forum Research. In a random sample of public opinion among1,578 Canadians aged18 and over, Costco came out on top in terms of customer satisfaction. In all, 62 per cent of respondents said they were “very satisfied,” with Costco.
Target scored the lowest, with only 27 per cent of customers saying they were very satisfied with their experience, a drop from 32 per cent in the spring, when the chain began opening its first stores in Canada. It plans to open 124 by the end of this year.
Some customers contacted by the Star complained that inventory in some Target stores is spotty and prices aren’t as low as expected. Others are taking the higher prices in stride because they perceive Target as more fashionable than competing discount retailer Walmart. “There’s an allure with Target,” said Kathleen Peroff, 27, who shops the Target at Square One in Mississauga and the location in Milton. Retail analyst Alex Arifuzzaman of Interstratics Consultants Inc. thinks Costco — in expansion across Cana- da — has the best chance of doing well in the current retail environment. “Their appeal is so wide, and they have no competition in Canada,” he said, pointing out that in the U.S., Costco competes against other discount warehouse chains.