By Michelle Graff
New York--Third quarter sales were soft for major chain retailers, which are grappling with a lack of compelling product and continued competition from pure-play online retailers. 

A number of the country’s largest department store chains, including Macy’s and J.C. Penney, as well as discounters such as Walmart and Kohl’s reported their third quarter earnings in November, just as the all-important holiday season began.

Same-store sales were essentially flat or even down slightly across the board. 

In the third quarter:
--The TJX Companies Inc. reported that same-store sales for its Marmaxx (Marshalls and T.J. Maxx) division in the U.S. were up 1 percent. Total sales increased 4 percent from $4.49 to $4.67 billion;

--U.S. same-store sales inched up 1 percent for Target Corp. while total sales also were up 1 percent, from $16.9 to $17.3 billion;

--Macy’s Inc. reported a 1 percent drop in both same-store and total sales, with CEO Terry Lundgren noting that “sales did not live up to our expectations in the quarter”;

--At J.C. Penney Co. Inc., comps were flat while total sales fell 1 percent from $2.78 billion to $2.76 billion. Fine jewelry, along with home goods, was listed as one of the retailer’s top-performing merchandise categories;   

--Kohl’s Corp. saw same-store sales drop 2 percent while total sales were down by the same, declining from $4.44 billion to $4.37 billion; and

--Same-store sales for Walmart in the U.S. were up 1 percent (excluding fuel) while total sales (including fuel) rose 3 percent. Sam’s Club reported flat comps with total sales up 2 percent. 

Howard Feller, a partner at MMG Advisors, an investment bank specializing in fashion and fashion-related mergers and acquisitions, said department store sales continued to experience an uneven sales cadence; stores will have a few strong weeks followed by an abysmal one. 

Also not helping department stores in the third quarter was the release of Apple’s new iPhone, which steered many consumers’ discretionary dollars away from their products. 

“The theme really for several months now--this trend dates back to early summer--is that business obviously has been down, but it’s been very choppy,” he said. “Choppy is still the word.” 

Many consumers still lack the type of discretionary income needed to generate steady, robust sales at department stores. As a result, the retail environment continues to be very promotional, with suppliers bearing the brunt of the margin erosion in the retail supply chain. 

This combined with increasing pressure on the supply side is squeezing suppliers in the middle. Feller said as a result, many suppliers are unable to generate the kind of quality, compelling product needed to attract customers today. As a result, they don’t come into the stores and sales remain stagnant. 

“The problem tends to feed on itself,” Feller said. “It become its own virtual circle of declining sales.” 

He said he anticipates the highly promotional environment will continue into the fourth quarter for the country’s major department store chains.  

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