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May Comps Shine for Specialty Retailers

Comps at specialty stores outperformed the rest of the retail market in May, led by Wet Seal and Bebe Stores, while luxury sizzled at Neiman's and Nordstrom.

NEW YORK — Lousy weather doesn’t necessarily mean lousy comps, especially among fashion and luxury retailers.

The specialty segment outperformed the rest of the retail market in May, as Wet Seal Inc. and Bebe Stores Inc. posted eye-popping same-store sales gains of 56.9 percent and 40.3 percent, respectively. Luxury continued to sizzle with standouts including The Neiman Marcus Group, with an 11 percent gain, and Nordstrom Inc., with a 7.4 percent monthly increase.

But the overall trend for May’s sales showed mostly a mixed bag with positive and negative segments in each sector. On the downside, Saks Department Store Group posted a 2.6 percent decline in the month’s comps. Aeropostale Inc. had a 4.9 percent decrease and Gap Inc.’s U.S. Gap division posted a 9 percent decline while Old Navy stores saw an 8 percent drop.

Positive players in the month were J.C. Penney Co. with a 3.5 percent increase, and Abercrombie & Fitch Co. with a 29 percent advance.

Among the 49 retailers tracked by WWD, 34 posted positive same-store sales in May, while 15 had a decline. Specialty retailers — bolstered by the increases from Wet Seal and Bebe — significantly outperformed the department store and mass merchant sectors with a 7.9 percent average increase, the highest aggregate increase in nine months. Department stores as a whole had a 2 percent same-store sales increase while mass merchants posted a 0.5 percent aggregate May increase.

Many retailers cited May’s below-average temperatures and higher markdowns for the sales weakness, but denim proved a strong seller among retailers with positive results.

Because colder weather and rain have often been cited since late March for poor sales levels, apparel retailers had little excuse for not having the right mix of unique and more weather-appropriate merchandise on hand, said Holly Guthrie, senior vice president at Morgan Keegan & Co., who covers the specialty retail segment.

“How can people complain about the weather when Bebe did a 40 [percent comp]?” Guthrie said. “Everybody knows that May will bring different kinds of weather. If you’re a good merchandiser, you carry some long-sleeved knits and light sweaters…and the better retailers [in May] did that.”

Mark Rein, senior manager in Capgemini’s global retail practice, said May’s sales results reflect a larger problem, which is that retailers are not successfully localizing weather-appropriate assortments in different regions of the country.

“You would not believe how many retailers still send the same assortments at the same time to all their stores,” Rein said. “You certainly can look at year-over-year trends and understand that you do need those long-sleeved Ts in Chicago and Minneapolis until the end of May, whereas you probably need to get rid of them sometime in March if you’re in Florida.”

The International Council of Shopping Centers noted in its monthly same-store sales report that, according to SDI/WeatherTrends, May’s weather was the coldest in 22 years. Nevertheless, aggregate comps rose 2.9 percent for the 67 chain stores the ICSC follows, which was on top of a 5.7 percent rise in May 2004.

Specific to the monthly performance at Wet Seal and Bebe, Rein said he’s seen a trend where fashion apparel retailers are now accurately focusing on the customer’s needs, which “is a big switch from just saying, ‘We’re creating fashion,'” he said.

“People are starting to really understand what certain segments of the population are looking for. The ones that are really focusing on a specific niche are really knocking it out of the park right now,” Rein said.

For its part, Wet Seal’s 56.9 percent May comp advance is jaw-dropping given that the retailer just returned to positive levels in January after posting roughly 30 months of declines. In May 2004, for example, the specialty retailer had a 7.8 percent decline, which was on top of a 25 percent comp-sales drop in May 2003.

Wet Seal’s new chief executive officer, Joel Waller, told WWD in early March — after just three months as ceo for the company — that “what we really did was change the focus of who we were going after and adjusted our prices,” which, he said, reflect “great value.” The company, which is the subject of an informal inquiry by the Securities and Exchange Commission, recently reported an improved first-quarter loss to $8.6 million from a loss of $20 million in the year-earlier quarter.

As for Bebe, Morgan Keegan’s Guthrie said denim, handbags and accessories, as well as the success of the company’s Bebe Sport division, have positively affected recent sales levels. She added that Greg Scott, ceo of Bebe, “has done an incredible job at including more of the aspects of the different lifestyles of his customers,” such as suits, dresses, skirts and sport apparel.

In the midtier department store sector, which includes retailers such as Dillard’s, Gottschalks, Federated and J.C. Penney, “They’ve been working on execution and improving their assortments and forecasting capabilities,” said Rein. “I think that’s starting to pay off.”

Looking at the mass merchants, several of whom rebounded from disappointing April sales, Rein thinks they “have now had a chance to understand what’s going on with [the] broader economy,” which is helping return sales to more historical levels. Target Corp. had comps that rose 5.1 percent in May, versus a 1.3 percent April increase, and Wal-Mart Stores Inc. saw an increase of 2.7 percent at its U.S. discount stores, compared with a 0.1 percent rise in April.

Chris Connelly, a partner in Accenture Ltd.’s retail practice, noted that May is typically a good month at discounters for sales of seasonal products like home and garden tools.

Looking to June, Connelly said that retailers who haven’t successfully captured the season’s apparel/merchandise trends may be in for at least another month of sales weakness. “We’re right in the middle of the summer [apparel selling] season so some of these [sales] trends might continue for another month or so until these stores can refresh with fall product,” he said.

May Same-Store Sales
 
May
April
March
 
2005
2004
2005
2005
DEPARTMENT STORES
%Change
%Change
%Change
%Change
Bon-Ton
-6.1
2.6
4.9
-3.6
Dillard’s
1.0
-5.0
-6.0
-8.0
Federated
0.8
2.9
2.8
3.4
Gottschalks
4.2
-7.6
1.9
-2.4
Kohl’s
0.2
5.0
8.0
-1.0
May Co.
-2.9
-3.8
1.5
-10.8
Neiman Marcus
11.0
8.5
14.2
3.4
Nordstrom
7.4
9.4
6.9
5.5
J.C. Penney
3.5
9.1
3.6
0.1
Saks Dept. Store Group
-2.6
3.1
-5.4
1.8
Saks Fifth Ave. Enterprises
0.8
19.4
7.1
2.9
Sears Holdings
NA
-3.7
NA
NA
Stage Stores
7.0
1.0
-2.5
12.1
Average:
2.0
3.1
3.1
0.3
SPECIALTY CHAINS
 
 
 
 
Abercrombie & Fitch
29.0
1.0
16.0
21.0
Aeropostale
-4.9
27.0
-5.7
6.8
American Eagle
17.1
11.4
20.0
29.2
Ann Taylor
7.1
9.9
-3.0
-1.7
Banana Republic
-7.0
8.0
-6.0
-1.0
Bebe
40.3
10.2
31.2
30.6
Buckle
8.6
8.3
4.0
8.0
Cache
10.0
4.0
-3.0
0.0
Cato
-1.0
4.0
-10.0
2.0
Charming Shoppes
-2.0
5.0
3.0
-3.0
Chico’s FAS
13.6
17.9
15.5
7.8
Christopher & Banks
7.0
-6.0
3.0
2.0
Claire’s
3.0
10.0
-2.0
10.0
Deb Shops
2.7
-2.3
10.3
10.2
Dress Barn
1.0
4.0
3.0
7.0
Gap (U.S. stores)
-9.0
10.0
-9.0
-1.0
Goody’s Family Clothing
-9.1
1.3
-12.1
-9.2
Guess
1.9
14.6
-1.2
6.7
Hot Topic
-1.9
-0.5
-4.1
5.3
Limited Brands
-1.0
3.0
-4.0
-7.0
Mothers Work
-8.1
-3.0
3.1
-3.0
New York & Co.
0.6
NA
-0.7
2.9
Old Navy
-8.0
4.0
0.0
-9.0
Pacific Sunwear
0.4
7.8
-6.4
4.8
Talbots
4.1
8.1
7.1
0.9
United Retail
10.0
-1.0
11.0
9.0
Walgreens
8.8
8.5
5.3
11.6
Wet Seal
56.9
-7.8
35.7
36.3
Wilsons
11.0
-6.4
13.0
27.0
Average:
7.3
5.4
3.9
7.0
MASS MERCHANTS
 
 
 
 
Family Dollar
0.2
3.5
0.9
2.4
Retail Ventures
-3.2
1.9
-0.7
-6.5
Ross Stores
7.0
-1.0
1.0
3.0
ShopKo
-7.2
3.2
-11.1
-0.6
Stein Mart
0.4
11.1
6.2
-0.9
Target
5.1
5.8
1.3
8.2
TJX Cos.
-1.0
5.0
4.0
1.0
Wal-Mart (discount stores)
2.7
4.8
0.1
4.8
Average:
0.5
4.3
0.2
1.4
Tally:
 
 
 
 
Up
34
37
30
32
Flat
0
0
1
1
Down
15
12
18
16
Total
49
49
49
49
Source: Company Reports