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Retailers' earnings suffer in quarter as consumers keep belts tight

February 25, 2009|Associated Press

NEW YORK — Retailers marched out a series of cheerless results Tuesday for their most important season of the year, the fourth quarter, when consumers seem to have put off buying almost anything they had a choice about.

Macy's Inc., Target Corp., RadioShack Corp., Home Depot Inc. and Office Depot Inc. are among those laying off workers, renewing promotions of their low prices and closing stores and whole divisions to deal with record-low consumer confidence and projections of another year of slow sales.

Target said Tuesday that it was responding by expanding its food offerings and bolstering its private-label lines.

It said in January that it would cut 9% of its headquarters staff, close a distribution center and reduce store openings.

Target's fourth-quarter profit fell 41%, partly because it marked down merchandise during the holiday season.

Rising delinquencies in Target's credit-card business -- half of which JPMorgan bought last May -- also hurt results.

The company, which is based in Minneapolis, expects a drop this year in sales at stores open at least a year.

It has suffered more from consumers cutting spending than its chief rival Wal-Mart Stores Inc. because more than 40% of Target's revenue comes from nonessentials such as funky jeans and quilts.

As consumers hold out for bargains and shop mainly for necessities, department stores are faring worse.

Macy's reported that its fourth-quarter profit fell nearly 59%.

But those results beat analyst expectations.

The Cincinnati retailer said this month that it would cut 7,000 jobs, or almost 4% of its workforce, reduce capital spending, reduce its contributions to its employees' retirement funds and slash its dividend to preserve cash.

Home Depot Inc. reported a $54-million fourth-quarter loss, mainly because of its plan to shut its four smaller home-improvement chains. The results beat analysts' expectations.

The Atlanta-based retailer has said it is cutting 7,000 jobs, or about 2% of its workforce. It is trying to improve customer service and cut inventory as home sales decline and customers spend less on repairs and remodeling.

Office supplies retailer Office Depot reported a $1.54-billion loss, hurt by charges for a restructuring, including facility closings and job cuts, as well as a 15% drop in sales.

The Boca Raton, Fla., company has been struggling as customers, particularly small businesses, cut back. Office Depot said it would close 118 stores during the year and open fewer new stores in 2009.

RadioShack said its fourth-quarter profit fell 39%, hurt by poor sales of electronics such as GPS navigation systems and cameras. The results were worse than analysts expected.

The Fort Worth company plans to focus on trimming inventory and will introduce new private brands.

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