U.S. Retailers' Sales Fell for Second Straight Week

Sept. 25 (Bloomberg) -- U.S. consumers curbed purchases of clothes and home goods, pushing retail sales down for a second week amid a housing slump. Lowe's Cos. and Target Corp. cut their forecasts as customer spending slowed.

U.S. retail sales at stores open at least a year fell 1 percent last week from the previous week, and September sales may rise as little as 2 percent, less than the 2.5 percent gain previously estimated, according to a report today by the International Council of Shopping Centers and UBS Securities LLC. The group tracks weekly sales at 75 retail-chain stores.

Higher gasoline prices and the worst U.S. housing slump in more than a decade have prompted shoppers to pull back on discretionary spending. Consumer confidence fell to the lowest level in almost two years, the Conference Board said today, raising concerns of a further scaling back on retail purchases.

``Consumers have been whipped back and forth like crazy,'' said Kurt Barnard, president of Retail Forecasting LLC in New Jersey. ``Money has become a commodity to be treasured.''

Lowe's Cos., the second-largest U.S. home-improvement retailer, said yesterday after U.S. markets closed that earnings this year may miss its previous forecast. Target Corp., the second-biggest U.S. discount chain, lowered September sales projections late yesterday after customer visits fell. Lowe's shares today plunged the most in four years on the announcement.

Fed's Rate Cut

The Federal Reserve cut its key interest rate last week for the first time in four years over concerns that problems in the housing market could further constrict consumer spending, which accounts for two-thirds of U.S. economic activity.

Apparel, home-goods and consumer-electronics retailers will be most hurt by the fallout of high fuel costs and the housing slump, Frank Badillo, senior economist at Retail Forward Inc., said today in an interview.

Sales last week rose 2.4 percent compared with a year ago, the smallest gain in three weeks, the shopping center group said.

Lowe's fell $2.04, or 6.7 percent, to $28.51 at 4:03 p.m. in New York Stock Exchange composite trading. The Mooresville, North Carolina-based company said profit may decline as much as 9 percent this year from 2006. The shares have fallen 8.5 percent this year, compared with an 18 percent drop for larger Home Depot Inc.

Target, based in Minneapolis, forecast same-store sales to rise as little as 1.5 percent, less than half of what it had projected. Target fell $2.95, or 4.6 percent, to $61.35 in New York trading.

Redbook Report

The Johnson Redbook Index, another measure of U.S. retail sales, rose 1.6 percent last week from a year earlier, its lowest gain this month.

The index measures same-store sales at general-merchandise retailers representing about 9,000 locations. The sales are considered an industry benchmark because they exclude results from new or closed locations.

The Standard & Poor's Retailing Index of 29 companies slipped 2.7 percent, the most in three weeks. The index has declined 5.9 percent this year. It gained 9.4 percent in 2006.

The National Retail Federation and TNS Retail Forward both forecast that this year's holiday sales will increase at the slowest pace in five years.

Back-to-School Correlation

``Typically the holiday season has a pretty high correlation to back-to-school,'' said Steven Baumgarten, an analyst at PNC Wealth Management in Philadelphia, with $77 billion in assets including shares of Wal-Mart Stores Inc. ``If you look at the back-to-school sales, they weren't that great.''

Wal-Mart marked down 16,000 back-to-school items in July to lure shoppers after fewer customer visits. The world's largest retailer in August cut its full-year profit forecast to as much as $3.13 a share after sales of apparel and home goods faltered. Wal-Mart, based in Bentonville, Arkansas, fell 81 cents, or 1.8 percent, to $43.16 in New York trading.

Sears Holding Corp., the largest U.S. department-store chain, will add bedroom and bathroom goods under the brand Abbey Hill this month to reverse declining sales at stores open at least a year, which have dropped in every quarter since the merger of Sears, Roebuck & Co. and Kmart Holding Corp. in 2005.

Sears shares fell 3.5 percent to $124.27 in New York, the lowest price since March 2006. They have dropped 26 percent this year.

Macy's Inc., the second-biggest U.S. department-store chain after Sears, earlier this month introduced the Martha Stewart Collection including holiday-decorating items and cookbooks to boost sales. The shares declined 3.2 percent to $31.91 in New York trading.

Warehouse Retailers

Badillo of Retail Forward expects online retailers and warehouse clubs, such as Costco Wholesale Corp., to boost sales through the November and December holidays amid the housing slump. Costco, which declined 87 cents, or 1.4 percent, to $59.38 in New York trading today, have risen 12 percent so far this year.

Amazon.com Inc., the world's largest Internet retailer, began testing a digital-music download service to compete with Apple Inc.'s iTunes. Amazon.com, based in Seattle, rose 89 cents to $93.48 in New York trading. The shares have more than doubled this year.