MW: Retail stocks fall on ADP report; Dollar General profit rises
By Andria Cheng, MarketWatch
NEW YORK (MarketWatch) -- Retail stocks fell with the broader markets Wednesday after companies in the U.S. private sector unexpectedly shed 23,000 jobs, signaling a still fragile job market that may continue to pressure consumer spending.
The S&P Retail Index (RLX 451.69, -1.83, -0.40%) fell 0.6% to 450.61.
Economists had forecast a gain of 40,000 jobs in March ADP employment report, which comes two days before the Labor Department reports on nonfarm payroll growth for March. Economists are also expecting a sizable jump in nonfarm payroll in March. The consensus forecast of Wall Street economists is for an increase of 189,000 in nonfarm payrolls. The ADP report does not include federal workers. Many economists expect a surge in federal workers related to the 2010 Census. The ADP report does not capture changes in the weather. See full story on ADP report.
With a still downbeat job market overshadowing consumers, discount stores remain a favorite among consumers, analysts said.
As an example, in its first quarterly report since selling shares to the public in November, Dollar General Corp. (DG 25.36, -0.43, -1.67%) said fourth-quarter profit rose to $87.2 million, or 26 cents a share, from $81.9 million, or 26 cents a share, in the year-ago period. Sales for the period ended Jan. 29 rose 12% to $3.2 billion with same-store sales increasing 7.4%.
On an adjusted basis, the Goodlettsville, Tenn., discount retailer said it earned 51 cents a share in the most recent period. Analysts polled by FactSet Research were looking for earnings of 43 cents a share, on average.
For 2010, Dollar General said it expects sales to climb between 8% and 10% with same-store sales increasing as much as 6%. It forecast per-share profit of $1.55 to $1.63 a share. The company also plans to open 600 new stores. Analysts estimated profit of $1.57 a share for the year, according to FactSet.
"We believe management set out attainable guidance so that it can exceed expectations throughout the year," said Morgan Stanley analyst Mark Wiltamuth.
Dollar General Corp. (DG 25.36, -0.43, -1.67%) shares fell 2.5%.
Rival Dollar Tree Inc. (DLTR 59.51, -0.06, -0.10%) shares fell 0.4%. Family Dollar Stores Inc. (FDO 36.98, 0.00, 0.00%) was down 0.5%. Wal-Mart Stores Inc. (WMT 55.82, -0.09, -0.16%) dipped 0.3%.
Macy's Inc. (M 21.97, -0.15, -0.68%) shares fell about 1%. The department store operator said it has repurchased $500 million of debt for a total cost of about $526 million, including transaction expenses. It has booked $27 million in premium and fees to interest expense in the first quarter, which Macy's said it expects to be offset this year by reduced interest expense on the debt repurchased.
