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February Same-Store Sales Spring a Positive Surprise

Same-store sales results produced a February surprise at major stores, as stronger-than-expected numbers set the bar for the rest of 2005.

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NEW YORK — Same-store sales results produced a February surprise as stronger than expected numbers set the bar for the rest of 2005.

Successful spring transitional merchandise, leftover gift card usage and an eye on full-priced selling put Kohl’s Corp., Dillard’s Inc., Wet Seal Inc., Saks Fifth Avenue Enterprises, New York & Co. Inc., Aeropostale Inc. and Talbots Inc. among the winners. Their performance more than measured up despite stormy weather in the Northeast, California and other parts of the country, and tough comparisons with February 2004, when the return to high fashion was just beginning.

Wal-Mart beat its own estimates with a 4.1 percent advance in its discount stores, the company’s biggest increase in nine months. And Target Corp., with a 9 percent February comp advance, said on a recorded call that women’s apparel was among the strongest merchandise categories in the month. The company forecast March comps to be up 6 to 8 percent and, like many other retailers, said results in the month are likely to benefit from this year’s earlier Easter.

“Compelling fashion trends, coupled with a change in consumer cash flows [a decline in onetime gains from home refinancing and tax rebates], have helped to fuel a shift of consumer spending from home fashion and hard lines merchandise to more moderately priced apparel,” Richard Jaffe, an analyst at Legg Mason Wood Walker, wrote in a research report Thursday.

Abercrombie & Fitch Co. and Nordstrom Inc. also posted strong results last month, gaining 19 percent and 7 percent, respectively.

“I’m feeling positive momentum. I don’t think it’s a one-off,” said Janet Hoffman, a partner in Accenture Ltd.’s retail practice. “If we look back over the last six to 12 months, we’ve seen incremental positive sales and now we’re really starting to see some momentum….The economic indicators would tell you that we’re in a stable period. Employment levels are better, and so consumers are out and spending.”

Of the 50 retailers tracked by WWD, 39 had positive February same-store sales — defined as sales at stores open at least a year — while 11 posted negative comps. The specialty retail sector had the biggest aggregate monthly advance, up 6.9 percent, while mass merchants turned in a 4.3 percent overall increase and the department store group had a 3 percent gain.

This story first appeared in the March 4, 2005 issue of WWD.  Subscribe Today.

The Goldman Sachs Retail Composite Index posted a 4.3 percent advance in February comps, compared with a 7 percent rise in 2004.

But don’t pop open the champagne just yet. February, for most retailers the first month of the first quarter, is the shortest month of the year for sales, usually making up 25 percent of the quarter’s volume. In addition, high gasoline prices are likely to still have an impact on consumers’ discretionary income. Those factors are why few retailers increased their profit expectations for the quarter, analysts said.

Although consumers who may have tempered apparel spending in the last few months because of higher oil and natural gas prices appear to be back in stores, propelled by a continuation of last spring’s fashion cycle, there could be a bit of concern come summer.

“American consumers have become resigned to the fact that the higher price of gasoline is the new reality that they have to deal with,’’ said Kurt Barnard, president of Barnard’s Retail consulting Group. “My real concern is where do they take the money from after they have filled the tank with gasoline?….I have a fear that it comes from the credit card.”

Barnard said that he’s worried about what it may mean for retailers on a longer-term basis, and that they might feel a big pinch in consumer spending during the summer, which is typically when consumers spend more time on the road and consequently fork over more dollars at the gas pump.

“All [retailers] can do is negotiate as carefully as they can…their inventory positions based on their reading of what is likely to happen,” Barnard said.

For now, retailers can hope that the positive trend continues.

One of the major surprises in the specialty space came from Wet Seal with a 16.4 percent rise in February comps, compared with a 12.5 percent decline in February 2004. The company, which has been struggling, cited positive results for its new merchandise strategy, although it closed 95 stores in February.

Gap Inc.’s series of fashion misses and weak traffic trends helped continue its chain of disappointing monthly same-store sales, with a 6 percent decline at Banana Republic, a 2 percent drop at U.S. Gap stores and a 1 percent decrease at Old Navy. Banana Republic and Old Navy, however, were each up against double-digit percentage increases from February 2004.

Luxury chains, Saks Fifth Avenue Enterprises, Neiman Marcus Group and Nordstrom, each posted solid results, bolstering views that luxury is here to stay. Neiman Marcus president and chief executive officer Burt Tansky, whose company posted a 19.3 percent rise in fourth-quarter earnings, epitomized the trend, saying on Wednesday that “luxury is alive and well.”

In the traditional department store sector, results were driven by strong sales around Presidents’ Day and Valentine’s Day, said Deborah Weinswig, managing director of U.S. equity research at Citigroup Smith Barney, in a research report on Thursday. In addition, she wrote, the “department stores set spring and cruise [apparel] earlier this year, learning something from the specialty stores.”

Regarding Kohl’s and J.C. Penney Co., Weinswig noted that an “improving fashion message at the value-oriented retailers, combined with the compelling price-value message, has resonated with lower-end customers who are now back in the stores buying apparel.”

On the other hand, Federated Department Stores reported a 1.8 percent boost in sales and May Department Stores, which Federated acquired this week, posted a 4.1 percent decline.

FEBRUARY SAME-STORE SALES
February 2005 % change
January 2005 % change
December 2005 % change
November 2005 % change
DEPARTMENT STORES
Bon-Ton
-2.5
6.6
6.6
5.4
Dillard’s
5
3
1
-3
Federated
1.8
-0.4
2.3
-1.4
Gottschalks
-0.6
0.9
0
-8.1
Kohl’s
6.1
-1.6
3.1
0
May Co.
-4.2
-7.2
-3.5
-7.9
Neiman Marcus
7.7
12.2
10.8
8.4
Nordstrom
7
8.8
9.3
3.1
J.C. Penney
6.1
3.3
-1.2
12
Saks Dept. Store Group
0.9
-0.9
2.8
-0.6
Saks Fifth Ave. Enterprises
7.1
3
12.1
6.8
Sears, Roebuck (U.S. stores)
1.3
0.8
-3
2.8
Stage Stores
3.7
3.7
3.1
6
Average:
3
2.5
3.3
1.8
SPECIALTY CHAINS
Abercrombie & Fitch
19
17
10
2
Aeropostale
13.4
2.5
0.5
4.1
American Eagle
32.4
22
32.8
24.3
Ann Taylor
-5.4
-3.6
-1.5
-8.3
Banana Republic
-6
7
-2
-3
Bebe
25.3
29.3
28
23.2
Buckle
6.4
8.6
4.4
-0.4
Cache
3
2
7
3
Cato
7
4
2
3
Charming Shoppes
1
-3
-3
3
Chico’s FAS
9.2
8.2
18.6
8.6
Christopher & Banks
5
19
-7
-3
Claire’s
6
7
5
3
Deb Shops
1.8
-0.1
5
-1.8
Dress Barn
15
1
2
4
Gap (U.S. stores)
-2
-6
2
1
Goody’s Family Clothing
-0.8
-3.4
0.7
-0.6
Guess
1.8
4.4
5.6
0.5
Hot Topic
0.2
-2.5
-6.2
-8
Limited Brands
-4
9
2
-5
Mothers Work
-2.3
-3.7
-1.9
-11.6
New York & Co.
9.8
1.2
-5
-0.4
Old Navy
-1
-13
-1
-5
Pacific Sunwear
10.5
8.1
5.3
2.7
Talbots
8.1
13.4
2.8
-0.5
United Retail
13
8
6
11
Walgreen
9.3
10
4.2
11.4
Wet Seal
16.4
8.2
-11.8
-19.5
Wilsons
7.8
-1.1
-4.7
-3.1
Average:
6.9
5.3
3.4
1.2
MASS MERCHANTS
Family Dollar
4.9
5.2
4
5.2
Retail Ventures
1.5
2.9
-0.7
-5.3
Ross Stores
6
-1
2
-2
ShopKo
-3.4
-1.7
-5.3
-4.8
Stein Mart
6.2
13.1
10.3
2
Target (discount stores)
9
9.4
5.1
3.2
TJX
6
5
6
2
Wal-Mart (discount stores)
4.1
3.2
2.6
0.3
Average:
4.3
4.5
3
0.1
Tally:
Up
39
35
34
27
Flat
0
0
1
1
Down
11
15
15
22
Total
50
50
50
50
SOURCE: COMPANY REPORTS
PARENTHESES INDICATE DECLINES
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