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Fears of US slowdown

Weak trading figures at US department store trio Macy’s, JC Penney and Kohl’s have prompted fears of a slowdown in the US retail market.
Profits at JC Penney fell by more than 8% to US$261 million (£127m) for the three months to November 3 as sales “weakened dramatically”. Like-for-like sales at the mid-market department store were down 3.5% for the period, prompting the management to revise fourth-quarter earnings targets.

The credit crunch, poor US housing market conditions, rising oil prices and an unusually mild winter were blamed for lack of consumer confidence and the slowdown in trade.

JC Penney chairman and chief executive Myron Ullman III said: “After a strong back-to-school season and a favourable response to our early fall merchandise, we were disappointed to see sales weaken dramatically in September and October. The weak housing conditions, mortgage and credit market concerns and rising fuel prices have clearly led to a challenging environment for consumers. Along with the unseasonable weather, this has created difficult conditions for most retailers, and our third-quarter performance shows that JC Penney was not immune to those conditions.”

Like-for-like sales at Kohl’s fell by 2.6% and profits were down 13% to US$194m (£95m) for the three months to November 3. Total sales at the chain rose 4.8% to US$3.83 billion (£1.87bn) compared with the same period last year.

Macy’s share price fell 7.1% to US$28.47 (1390p) per share last week, despite third-quarter profits rising US$33m (£16.1m) against a loss of US$3m (£1.5m) last year. However, profits were temporarily boosted by a lower tax rate and exceptionals.

Macy’s expects sales for the fourth quarter to be between US$8.7bn and US$8.9bn (£4.23bn and £4.33bn), lower than previous estimates.
However, department store group Nordstrom fared better. Like-for-like sales rose 2.2% for the three months to November 3, with total sales up 5.3% to US$1.97bn (£955.6m) for the period. Net earnings rose to US$165.7m (£80m), up from US$135.7m (£65.8m) the year before. The figures were helped by a timing shift in reporting.

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