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    Mixed Results for Major Chain Stores in June

    BENTONVILLE, Ark.; ISSAQUAH, Wash.; MINNEAPOLIS; and NATICK, Mass. -- Despite challenging economic times, June was a good month at Costco and Target, while Wal-Mart and BJ's Wholesale Club suffered some sales setbacks, exacerbated by an uncooperative Mother Nature.

    BENTONVILLE, Ark.; ISSAQUAH, Wash.; MINNEAPOLIS; and NATICK, Mass. -- Despite challenging economic times, June was a good month at Costco and Target, while Wal-Mart and BJ's Wholesale Club suffered some sales setbacks, exacerbated by an uncooperative Mother Nature.

    According to a report by Richard Hastings, v.p.-senior retail sector analyst for New York-based Bernard Sands, "Slower housing price growth, especially in the Northeast region, amplified the already unpleasant effects of high gas prices. These, combined with record rainfall and floods in the Mid-Atlantic and Northeast[,] slow wage growth, and higher borrowing costs for home equity,...pulled June sales to the lowest levels seen since 2003."

    Wal-Mart Stores, Inc. said yesterday that total U.S. same-store sales rose 1.2 percent for the month of June, which was short of Wall Street expectations for a 2 percent increase. Total sales grew 10.4 percent in June to $33.12 billion from $29.99 billion last year. However, international sales gained an impressive 29.5 percent to $7.6 billion from last year, including sales from the consolidation of Seiyu and Wal-Mart Central America, and the acquisition in Southern Brazil.

    The company's Wal-Mart Stores division saw a 1.1 percent same-store sales increase during the month, while Sam's Club same-store sales rose 1.3 percent, excluding fuel.

    The company said average ticket continues to drive results, as traffic declined during the five-week period. Citing rising gas prices, c.f.o. Tom Schoewe said in a statement that Wal-Mart continues to see customers consolidating their trips.

    For the 22-week year-to-date period, Wal-Mart's total U.S. same-store sales rose 2.7 percent, and total sales increased 11.8 percent to $140.93 billion from $126.06 billion a year ago.

    Any disappointing sales at the world's biggest retailer should be temporary, however, noted Hastings. "While there are developing risks to their general merchandise sales, Wal-Mart should continue to generate smooth results due to its supermarket business, that, in conjunction with better planning and sharply focused promotions, will help Wal-Mart grow profits as they tweak their store layout and inventory models," his report said, adding, "We see even better earnings momentum from their archrival, Costco, where below-market gas prices and strong responses to their consumables and grocery offerings, combined with their higher-income customer base, will continue to [experience] smooth...sales and earning growth."

    In seeming confirmation of Hastings' rosy prediction, Costco Wholesale Corp. yesterday reported net sales of $5.74 billion for the five weeks ended July 2, 2006, an increase of 10 percent from the same period of the prior fiscal year. For the 44 weeks ended July 2, the company reported net sales of $48.75 billion, an increase of 11 percent from last year.

    Comparable sales were up 4 percent for the five-week period in the U.S., while comparable sales in the 44-week period were up 7 percent. International sales fared even better, with a 14 percent increase in the 5-week period and a 10 percent jump in the 44-week period.

    Costco, which currently operates 480 warehouses internationally, said it plans to open an additional eight to nine new warehouses, including the relocation of one warehouse to a larger and better-located facility, prior to the end of its 53-week 2006 fiscal year, on Sept. 3.

    BJ's Wholesale Club, Inc.'s June 2006 sales rose 3.6 percent to $825.0 million, from $796.1 million last year. The company's comparable-club sales for the month, meanwhile dipped 0.1 percent compared with last year, including a contribution from gasoline sales of 2.1 percent. Sales for June were adversely affected by record-breaking rainfall in most of the chain's surrounding communities. Comparable-food sales decreased went down 2 percent, while those of general merchandise sales decreased about 3 percent.

    Last year BJ's posted a 4.3 percent comparable-club sales rise for June, including a negative impact from gas sales of 30 basis points. As a result of lower than expected sales for the month and lower gasoline profitability in May and June, the company adjusted its earning guidance downward, to 37 cents to 40 cents, from 43 to 47 cents.

    Buoyed by strong perishables, pharmacy, and baby merchandise sales, Target Corp. posted a June same-store sales increase of 4.8 percent. Net retail sales for the five weeks ended July 1 rose 11.3 percent to $5.09 billion, up from $4.58 billion in the same period a year ago. The strongest merchandise categories included perishables, consumables, pharmacy, and baby merchandise, while the weakest areas were entertainment, domestics and home d├ęcor. Target further said its inventory was in "very good" condition.

    According to Bob Ulrich, Target's chairman and c.e.o., "These results give us confidence that we will meet or exceed the current First Call median EPS estimate of 69 cents in the second quarter."

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