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Comps Scorecard: A High-Low Affair

Same-store sales fall, but show some signs of life.

The entrance to the Neiman Marcus flagship.

The trend in same-store sales thawed slightly last month, but upper-end retailers didn’t feel the warmth.


Retailers on Thursday generally reported lower comparable-store sales for February, but decreases moderated slightly from the levels of recent months and were often better than the stores and analysts had expected. However, the results, anchored by a strong performance by Wal-Mart Stores Inc., were kinder to discounters and off-price stores than they were to department and specialty ones.

And luxury retailers Saks Inc., Neiman Marcus Inc. and Nordstrom Inc., as well as teen retailer Abercrombie & Fitch, remained mired in double-digit declines.

The comp results did little for the stock market as Wall Street continued to plumb historic lows, although concerns about the solvency of General Motors and the vulnerability of Citigroup and other U.S. banks moved the markets far more than the retail sales results. The S&P Retail Index gave back Wednesday’s gains, dropping 3.6 percent Thursday to 232.89, but fared better than the Dow Jones Industrial Average, below 6,600 after a 4.1 percent drop, and the S&P 500, back below 700 after declining 4.3 percent.

Noting lower gas prices freed up money for shopping, Wal-Mart again set the pace for monthly advances with a 5.1 percent leap in comps, excluding fuel, and a 5 percent comp gain in Wal-Mart’s U.S. stores.

“Although Wal-Mart may have been the poster child of February’s relatively better-than-expected industry sales performance, there was a slightly broader industry improvement for the month,” said Michael Niemira, chief economist and director of research at the International Council of Shopping Centers. “Moreover, the last four months show an increasingly less negative performance for the industry, which is an encouraging sign and one that ultimately will form a foundation for stronger sales performance later in the year.”

Citigroup broadlines analyst Deborah Weinswig agreed. “The big takeaway from today is that it almost seems like we’re seeing a stabilization or an acceleration,” she said, pointing out that November might have been when retailers hit bottom. “I feel very encouraged coming off of this month.”

Either way, Weinswig said she saw an uptick in home merchandise sales and in private label, which “continued to outpace the growth of national brands,” mainly because consumers get “better value for their money.”

“I think everyone’s shouting price,” she said, and as a result, “big-box retailers are gaining market share.”

BJ’s Wholesale Club Inc. led discounters this month, with an 8.2 percent increase in comps, but said it experienced weakness in jewelry and apparel.

Comps fell 4.1 percent at Minneapolis-based Target Corp., which had its ratings outlook changed to “negative” from “stable” by Moody’s Investors Service based on weaker performance and “stress” in its credit card portfolio. Ross Stores Inc. managed a 1 percent increase in February, and its larger off-price rival, The TJX Cos. Inc., reported comps were flat.

The ongoing exodus to value was especially apparent in the slumping comps of luxury department stores.

In the department store sector, where all firms reported decreases, high-end rivals Saks and Neiman Marcus fared the worst, recording blistering drops of 26 and 24.2 percent, respectively.

Nordstrom Inc. posted a decline of 15.4 percent, including a 0.6 percent dip in comps at the retailer’s off-price chain, Nordstrom Rack stores.

“We think Nordstrom could potentially benefit in that trade-down bucket of stores,” said Piper Jaffray retail analyst Neely Tamminga, who noted the Seattle-based firm’s “fortuitous” move to open more Rack stores is not based on the poor economy, but has been in the pipeline for several months.

Midtier retailer Kohl’s Corp. outshined its rivals, posting a 1.6 percent drop, followed by Macy’s Inc. and The Bon-Ton Stores Inc., which both reported comp decreases of 8.5 percent.

Not far behind were J.C. Penney Co. Inc. and Stage Stores Inc., with respective declines of 8.6 and 8.8 percent. Dillard’s Inc. had a 13 percent drop, and Gottschalks Inc., which filed for bankruptcy protection in January, did not report monthly comps. (For more on Dillard’s results, see page 13.)

Specialty stores weighed in with mixed results, led by The Buckle Inc.’s gravity-defying 21 percent increase, which was more than twice what analysts had estimated. (For more on Buckle’s winning formula, see page 14.) Limited Brands Inc.’s 7 percent slide was better than the company’s projection of a double-digit retreat for the month. Better-than-anticipated results included Aéropostale Inc.’s 11 percent increase, Hot Topic Inc.’s 10.8 percent advance and declines of 7 percent and 6.6 percent at American Eagle Outfitters Inc. and The Wet Seal Inc., respectively.

Brean, Murray, Carret & Co. retail analyst Eric Beder highlighted Wet Seal’s rollout of the new lower-priced Arden B. model, which helped improve the concept store’s comps to down 11.5 percent, versus a drop of 23.9 percent a year ago. While Arden’s comps were its best performance since June, Beder said that overall, Wet Seal’s results were “somewhat mediocre,” and should improve as more in-season buying occurs.

Hot Topic’s Torrid division, which had a 4.8 comp gain, was another concept store posting better-than-expected results. According to retail analyst Jennifer Black of Jennifer Black & Associates, Torrid, which targets plus-size teen girls, has “truly captured this market niche” thanks to a product assortment that she described as “spot on.”

Citigroup retail analyst Kimberly Greenberger also praised Hot Topic, adding that while the retailer is not a “value destination,” its price points are “very attainable” and it has a good fashion assortment.

“At the end of the day, fashion matters,” Greenberger said. “It’s not just about price.”

 

Greenberger said the problem with Abercrombie & Fitch Co., with its 30 percent decline in February comps, is that its price points are too high and its fashion isn’t new. Both the Hollister and Ruehl divisions posted 33 percent decreases.

A&F shares slipped 12.9 percent on the day, to $18.24, and American Apparel Inc., after a higher-than-expected 9 percent comp drop, saw its stock decline 18.2 percent to $1.62.

Gap Inc.’s comps were off 12 percent, with Banana Republic and Old Navy slipping 16 and 13 percent, respectively.

Greenberger said because Gap’s inventory was so clean in January, the retailer was unable to be as promotional as its peers. But with an increase in mall traffic this month, versus a flat February, Old Navy and the Gap have shown some improvement.

Banana Republic may need to update its fashion assortment, the analyst said, as the “city lifestyle” approach adopted since the fall might not be timely. “Consumers just don’t want to look like they are spending money right now,” she said. Cato Corp. credited unseasonably warm weather for its 8 percent comp increase.

Pacific Sunwear of California Inc. and misses’ retailers Chico’s FAS Inc. and Caché Inc. all refrained from reporting monthly same-store sales.

Looking ahead, analysts seemed to agree that March comps will remain under pressure, as Easter falls in the second week of April, as opposed to last year, when it fell during the last week of March. According to Lazard Capital retail analyst Todd Slater, this shift will hurt March comps, and make “April numbers appear better.”

With this in mind, he warned investors: “With no direction, it’s still a stock picker’s market with a negative bias, so tread carefully.”