NEW YORK — Stagnating sales trends coupled with light inventory to clear made July’s comparable-store sales results a washout. Luxury retailers, of course, remained immune.
“Most women’s retailers were weak, but July is clearance and there was not much out there,” said Joseph Teklits, a retail analyst with Wachovia Capital Markets, in a note following results.
Despite the slowdown, the balance between gainers and losers among the 50 retailers tracked by WWD remained relatively even. The number of retailers reporting positive comps slid to 26 compared with 29 in May. The number of retailers reporting negative comps came in at 23, compared with 21 in June, while one retailer was flat.
The Goldman Sachs Retail Composite Index returned a gain of 2.6 percent, narrowly beating the firm’s estimate of a 2.5 percent increase. However, the Index was well off the 4 percent gain reported during July 2003.
On Wall Street, investors ignored same-store sales results, and fretted over rising oil prices instead. The Dow Jones Industrial Average closed Thursday down 163.5 points, or 1.6 percent, to 9, 963 while the S&P Retail Index fell 9.7 points, or 2.6 percent, to 366.4.
Given tighter inventory controls and concerns over rising energy prices, retailers and analysts hadn’t expected to be able to break free from the downward sales trend that began in late June.
“We would emphasize that July is a relatively small dollar volume month and is largely driven by clearance activity, as retailers prepare for the back-to-school season,” said Lehman Brothers retail analyst Robert Drbul, in his preview of department store comps. “While we are encouraged by the healthy consumer confidence numbers reported the last two months, we believe high gas prices remain a concern for consumers.”
With back-to-school offerings already hitting shelves and fall easily visible on the horizon, retailers are expecting a rebound in August.
Richard Hastings, a retail analyst with Bernard Sands, paints a more dire picture. “Anybody can see from looking at the explosive and unsustainable growth in home equity loans that households are reaching well beyond their spending capabilities,” wrote Hastings in a note following Tuesday’s release of government data showing declining consumer spending in June.But the spending power of affluent consumers has yet to wane, driving comps at high-end department stores. Neiman Marcus paced the group with a 16.6 percent comp gain. Nordstrom credited much of its 6.1 percent increase to strong sales in junior’s and specialty-sized apparel. Accessories and women’s and children’s shoes also excelled. The only category not posting positive results was women’s activewear.
“July is the most significant month of the quarter for Nordstrom’s due to our anniversary sales,” said Stephanie Allen of investor relations during a pre-recorded call. “The event went very well this year. We are continuing to see stronger customer response to color, newness and price points.”
The specialty and mass channels saw business start to pick up in the latter half of the month as well. “Overall, the last two weeks of July seemed to materially improve from the slow first half of the month [which was a continuation of June] — a good indicator for back-to-school,” wrote Wachovia’s Teklits in his preview of July comps.
American Eagle and Aeropostale credited the b-t-s season for their double-digit comp gains.
“We’ve had a terrific response to our new back-to-school assortment, which arrived in stores during the second week of the month,” said Laura Weil, Eagle’s chief financial officer, in a recorded statement. Women’s apparel comped in the mid-20s during the second week of the month and into the low-30s in the third.
Mass merchants also have begun to reap the benefits of the b-t-s season. Wal-Mart’s 2.4 percent gain was driven in large part by apparel. “Initial demand for back-to-school included strength in bedding, basic apparel, uniforms and new fall fashions, including skirts, polo shirts and screened Ts,” the company said in a sales call. “Less clearance merchandise in the period resulted in lower sales and markdowns in apparel and seasonal categories.”
The lack of clearance inventory and transition to b-t-s has gone less smoothly for Gap and Abercrombie. All three of the Gap’s concepts comped down for the month, with Gap U.S. falling 3 percent, Old Navy falling 2 percent and Banana Republic plunging 10 percent.“The difficult sales trend is in part due to our stores having a less promotional look than in prior years,” said Susan Riley, Abercrombie’s chief financial officer, in a recorded message. According to Riley, strong sales in women’s jeans, sweats and fleece, was offset by declines in knit tops, graphic Ts and pants.
— With contributions from Carrie Melago
JULY SAME-STORE SALES
July 2004 % Change
June 2004 % Change
May 2004 % Change
April 2004 % Change
J.C. Penney (dept. stores)
Saks Dept. Store Group
Saks Fifth Ave. Enterprises
Sears Roebuck (U.S. stores)
Abercrombie & Fitch
American Eagle (U.S. stores)
Christopher & Banks
Gap (U.S. stores)
Goody's Family Clothing
Target (discount stores)
Wal-Mart (discount stores)
SOURCE: COMPANY REPORTS PARENTHESES INDICATE DECLINES
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