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Tale of Two Price Points: April Comps Soar in Luxe As Discounters Stumble

Teens and luxury goods shoppers bolstered April same-store sales, but the month was a washout for the discounters, thanks to rising gas prices.

NEW YORK — Teens as well as shoppers looking to satisfy their taste for luxury goods bolstered April comps, while the month was a washout for discounters, thanks to rising gas prices.

Neiman Marcus Group — which earlier this week made a deal to be acquired by two equity firms for $5.1 billion — continued its double-digit rate of growth, with a 14.2 percent increase in April same-store sales. In the teen sector, the standouts included Abercrombie & Fitch, American Eagle, Wet Seal and Bebe. Department stores also saw strong same-store sales growth last month, with Kohl’s Corp. and J.C. Penney Co. registering advances of 8 percent and 3.6 percent, respectively.

But the discount sector suffered last month, with Target Corp. and Wal-Mart’s discount stores experiencing weak gains of 1.3 percent and 0.1 percent, respectively.

Overall, results were better than expected, especially in light of growing worries over the strength of the economy in the months ahead and rising fuel prices. Concerns that colder-than-average spring temperatures would keep customers home also generally proved unfounded in the month. However, shoppers ended up purchasing less spring seasonal merchandise, which caught many retailers off guard. Kohl’s and Pacific Sunwear of California, for example, said sales of shorts and T-shirts underperformed categories such as careerwear and sweatshirts.

“In total, I think the month was quite positive, and we’re really beginning to see a trend for ’05 that’s pleasing,” said Janet Hoffman, a partner in Accenture Ltd.’s retail practice.

The International Council of Shopping Centers said in a report that April same-store sales, or sales at chain stores open at least a year, rose a better-than-expected 2.2 percent for the 70 stores it follows. The shift of this year’s later Easter holiday into the March reporting period negatively impacted aggregate results by 100 to 200 basis points, the ICSC said.

“The results in April were uneven, but there were clear pockets of strength,” said Michael Niemira, the ICSC’s chief economist and director of research, in a statement. “The fact that the luxury, teen and wholesale club sales were relatively strong in April suggested that some segments of the consumer market are thriving despite the heightened consumer uncertainty.”

Among the 49 retailers tracked by WWD, 30 posted positive April comps, while 18 saw comps decline and one, Gap’s Old Navy division, posted same-store sales that were flat with the prior year. By sector, comps at the specialty retailers rose 3.9 percent in aggregate while department stores had a 3.1 percent overall increase and mass merchants had a 0.2 percent average rise in April comps.

Looking at specific retailers, Nordstrom reported a 6.9 percent rise, and Saks Fifth Avenue Enterprises saw comps advance 7.1 percent.

“The high end continues to be strong despite what the economy has done over the past two years,” said Hoffman, specifically citing the continued strength of Neiman’s and Nordstrom. April, for example, is the second month in a row that both companies have posted strong results on top of double-digit gains from the prior year. Neiman’s had comps of 14 percent in April 2004 and 25.7 percent in March 2004, while Nordstrom was up against comps of 15.9 percent and 10 percent in those months, respectively.

In the department store sector, Kohl’s higher-than-expected 8 percent jump in April comps helped bolster analysts’ expectations that a turnaround is in progress at the discount department store chain. April’s results followed a 1 percent decline in March comps, and a 6.1 percent increase in February.

The company said on a recorded call that, while shorts and swimwear were difficult to sell, accessories, like fashion jewelry, handbags and cosmetics, led the month’s sales. Dressy career apparel and new brands, such as Chap’s, also sold well.

At J.C. Penney, which saw April comps increase 3.6 percent on top of a 5.3 percent rise in April 2004, sales strength was seen in women’s accessories and careerwear as well as juniors’ and girls’ apparel. The company forecast first-quarter earnings of 61 cents, versus analysts’ consensus of 52 cents, and raised its full-year earnings prediction to $2.94 to $3.06. Analysts expect $3.09 in the year.

Federated Department Stores also came in with a strong 2.8 percent April number, following a 3.4 percent rise in March and a 1.8 percent increase in February. Terry Lundgren, president and chief executive of Federated, said in a statement that the company now sees first-quarter earnings coming in at 65 cents to 70 cents when it reports on May 11, up significantly from a prior guidance of 45 cents to 50 cents. Analysts have forecast 51 cents.

Hoffman, however, expressed concern that future comps in the department store space could reflect a sector that is still grappling with its overall consumer strategy, citing comps in the past two years that frequently have been positive one month and negative the next.

“For the near term, I would say they don’t really have their strategies down,” she explained, adding, “I would say there’s a place in the market for them. They are really getting much better at determining who the consumer is and what is it you want the consumer to do within these four walls.”

Meanwhile, discounter Target partially blamed the shift in the Easter holiday to one week earlier this year as compared with last year for its lower-than-anticipated 1.3 percent April comp increase. Traffic also declined slightly in the month, but the company said its total quarterly sales are stronger than expected, thanks in part to expanding gross margins. The company, along with Wal-Mart and Kohl’s, reports first-quarter earnings May 12.

Wal-Mart’s 0.1 percent comp gain at its discount stores was due to a decline in traffic. Ulysses Yannas of Buckman, Buckman & Reid said Wal-Mart’s April sales weakness reflects the impact of high gas prices crimping the spending power of its core customer as well as the company’s recent strategy to open new stores in existing markets. Wal-Mart is, therefore, “cannibalizing the comp stores with new stores that are not in the comps yet,” he said.

Finally, the specialty retail space saw perhaps the widest diversity in April results. Winners in the specialty channel include: American Eagle Outfitters, with a 20 percent jump; Abercrombie & Fitch, with a 16 percent rise; Talbots, with a 7.1 percent gain; United Retail, with an 11 percent advance, and Chico’s FAS, with a 15.5 percent rise.

Of those posting declines, Limited Brands delivered April comps that fell 4 percent, Ann Taylor had a 3 percent decline, Hot Topic posted a 4.1 decrease and Pacific Sunwear saw comps slip 6.4 percent.

Both Yannas and Hoffman noted the frequency with which specialty retail results change from positive to negative is due to the fashion cycle. As Yannas explained, “It’s making the wrong guesses.”

Said Hoffman: “In specialty, you always have to succumb to that volatility.” She noted that Limited, Gap and Hot Topic likely didn’t have the right product in their stores.

For its part, Ann Taylor said colder-than-expected weather led to high inventory levels and bigger promotional levels at Loft, while sweaters, woven shirts and other “wear-now” merchandise were strong sellers at Ann Taylor. As a result, the company lowered its first-quarter earnings estimate to 23 cents to 25 cents from a prior estimate for 27 cents to 30 cents. The consensus estimate was 26 cents.

April Same-Store Sales
 
April
March
February
 
2005
2004
2005
2005
 
% Change
% Change
% Change
% Change
Department Stores
    
Bon-Ton
4.9
-4.2
-3.6
-2.5
Dillard’s
-6.0
1.0
-8.0
5.0
Federated
2.8
5.4
3.4
1.8
Gottschalks
1.9
-0.8
-2.4
-0.6
Kohl’s
8.0
-4.6
-1.0
6.1
May Co.
1.5
-8.1
-10.8
-4.2
Neiman Marcus
14.2
14.0
3.4
7.7
Nordstrom
6.9
10.0
5.5
7.0
J.C. Penney
3.6
5.3
0.1
6.1
Saks Dept. Store Group
-5.4
10.6
1.8
0.9
Saks Fifth Ave. Enterprises
7.1
4.3
2.9
7.1
Sears Holdings
NA
NA
NA
NA
Stage Stores
-2.5
0.3
12.1
3.7
Average:
3.1
2.8
0.3
3.2
 
Specialty Chains
Abercrombie & Fitch
16.0
0.0
21.0
19.0
Aeropostale
-5.7
19.3
6.8
13.4
American Eagle
20.0
8.3
29.2
32.4
Ann Taylor
-3.0
9.6
-1.7
-5.4
Banana Republic
-6.0
12.0
-1.0
-6.0
Bebe
31.2
10.0
30.6
25.3
Buckle
4.0
8.6
8.0
6.4
Cache
-3.0
8.0
0.0
3.0
Cato
-10.0
-2.0
2.0
7.0
Charming Shoppes
3.0
4.0
-3.0
1.0
Chico’s FAS
15.5
16.0
7.8
9.2
Christopher & Banks
3.0
-3.0
2.0
5.0
Claire’s
-2.0
9.0
10.0
6.0
Deb Shops
10.3
1.4
10.2
1.8
Dress Barn
3.0
6.0
7.0
15.0
Gap (U.S. stores)
-9.0
2.0
-1.0
-2.0
Goody’s Family Clothing
-12.1
1.8
-9.2
-0.8
Guess
-1.2
17.5
6.7
1.8
Hot Topic
-4.1
0.7
5.3
0.2
Limited Brands
-4.0
2.0
-7.0
-4.0
Mothers Work
3.1
-0.4
-3.0
-2.3
New York & Co.
-0.7
NA
2.9
9.8
Old Navy
0.0
3.0
-9.0
-1.0
Pacific Sunwear
-6.4
11.4
4.8
10.5
Talbots
7.1
0.3
0.9
8.1
United Retail
11.0
-3.0
9.0
13.0
Walgreen
5.3
10.3
11.6
9.3
Wet Seal
35.7
-16.8
36.3
16.4
Wilsons
13.0
-3.5
27.0
7.8
Average:
3.9
4.7
7.0
6.9
 
Mass Merchants
Family Dollar
0.9
-0.4
2.4
4.9
Retail Ventures
-0.7
-0.2
-6.5
1.5
Ross Stores
1.0
2.0
3.0
6.0
ShopKo
-11.1
4.3
-0.6
-3.4
Stein Mart
6.2
6.7
-0.9
6.2
Target
1.3
6.2
8.2
9.0
TJX Cos.
4.0
5.0
1.0
6.0
Wal-Mart (discount stores)
0.1
3.6
4.8
4.1
Average:
0.2
3.4
1.4
4.3
 
Tally:
Up
30
34
32
38
Flat
1
1
1
0
Down
18
13
16
11
Total
49
48
49
49
Source: Company Reports