How the season is shaping up
Terry Lundgren ---C.E.O.
>> well the back-to-school season is upon us and with all the new fashions students are heading over to their favorite department stores. earlier today suzy assaad spoke with federated c.e.o. terry lundgren about how the season is shaping up.
>> our outlook continues to be the same for the combined august/september period looking at the third quarter to three and we’re comfortable with that forecast.
>> how are the back-to-school sales so far?
>> pretty good. different parts of the country better than others but for the most part on expectation with back to school. young businesses are doing well. it’s changing a little now and starting to get more preppie and a little bit less of the baggy jean business but still street wear selling well and the young kid business is doing quite well. overall it’s on expectation.
>> you mentioned some parts of country aren’t doing as well as others. what are those?
>> we were certainly affected by the hurricane in the state of florida. they have bounced back. there was a definite interruption in business in that market . and the west coast is showing some real signs of strength now which we haven’t seen consistently. that’s a little better than other parts of the country particularly the middle.
>> we’re trying to really find out a little more information about these high oil prices and how they’re impacting consumer behavior and consumer spending. have you noticed any kind of a shift or any kind of a puback from your custom―pullback from your customers?
>> we had a spectacular first half of the year up 5% on comparable stores and for a business our size that was recognized as very positive. the fact that we are planning our business for the fall season 1 1/2 to 3, there is some indication there that the oil prices and other related economic issues will impact the fall season more than the spring so we have that built into our forecast but we expect it to be a softer fall season than the robust spring season we had.
>> what about in terms of what people are buying? are they looking for more of the discounted stuff or the low-priced items?
>> actually we haven’t seen that in our business. our business has been generating sales more at the higher end of the business. that’s the―interesting what’s happening here. the higher end the more unique products the more differentiated products seem to be what’s selling best in our stores and one of our divisions, you mentioned bloomingdale’s which is the highest end division we have is outperforming the other divisions and that is just an indication that the high end consumer is less affected by oil prices and the like and these customers are certainly driving the overall performance of the company.
>> are you confident enough to make any predictions about the christmas season?
>> the christmas season, similar to the third quarter we expect to be about 1 1/2% to 3% increases this―in the fourth quarter. and again, we think there is new fashion coming in, particularly september and october that will carry into the fourth quarter and things like cashmere which was softer last year is a big opportunity this year. we’ve really analyzed the business in detail and our sense is this is going to be a relatively good performance for our company certainly in the fall season, particularly the fourth quarter.
>> do you think the sales that you’re seeing and the trends you’re seeing are reflecting the greater economy or is possibly federated doing a lot better than its competitors? >> well, right now we have outpaced the department store competitors, again, the high end, the very high end stores are doing, including our own bloomingdale’s stores are doing the very best but in the mid tier direct competitors to macy’s we seem to be outperforming and i think a lot of that has to do with the unique products, our private bonds, the ink, these brands are exploding for us and i think it’s because they’re different and a great value and i do think we have a bit of an edge in that regard.
>> shares of federated closed higher but just barely by three cents, $44.85 and gained about 6% over the past year. discounters are facing slower than expected sales gains during the back-to-school season as rising gasoline prices erode shoppers budgets. the international council of shopping centers yesterday reduced its august sales estimate. sales growth slowed to as little as 2 1/2% from an earlier estimate of 4%. economists say higher gasoline prices are partly to blame and discounters like wal-mart and target could be the most at risk. that’s because lower income shoppers tend to limit their spending the most when the price of gas rises. wal-mart just this week cut its forecast for sales at stores open at least a year. different story though, william sonoma, shares of the upscale retailer had their biggest gain in more than two years today after profits beat estimates. take a look at the chart of the day and you can see william sonoma up by nearly 10%, $3.14. the company also increased its revenue forecast for the current quarter, second quarter profit at william sonoma rose 55%. the company benefiting from growing demand for higher priced home furnishings boosting sales at the pottery barn chain they own by 10%. net income climbed to more than 27.5 million or 23 cents a share. profit exceeded the average estimate of analysts by four cents. sales up 19% to almost $690 million and that also exceeded analysts’ estimates. thailand’s largest airway plans to spend over $2 billion to expand. we’ll have more on that story and a preview of the pacific rim markets when we return.
