Most retailers got just what they were looking for in January — improved sales and lean inventories.
Stores reporting comparable-store sales results Thursday generally cited progress compared with last year’s dismal numbers, as well as the strongest figures of what for most of them was the fourth quarter. Upscale chains, led by Nordstrom Inc.’s 14-point gain, registered some of the largest increases, a sign more of stabilization than outright recovery.
“The story for January was a combination of an easy comp comparison and post-holiday clearance shopping,” said Bryan Eshelman, a managing director at AlixPartners’ retail practice. “To me, February will be a better indication of whether the consumer is buying.”
Eshelman said January comps were “a bit higher than expected....We’re no longer at the bottom.”
Referring to an economy struggling with high unemployment, tight credit and frugal consumers, among other issues, Eshelman said: “Everyone is willing to say the worst is over, but not everyone is willing to say we’re in a recovery.”
Overall, January comps were a positive harbinger for profits in both the fourth quarter of 2009 and the first three months of 2010, said Maggie Taylor, senior credit officer at Moody’s Investors Services. The upward revision of the fourth-quarter profit guidance of many firms “indicates that most retailers’ strategies of entering the 2009 holiday season with leaner inventory levels were likely successful at reducing the need to drastically mark down merchandise and thus improving fourth-quarter gross margins,” she said.
Despite the positive tone, Moody’s said “upward ratings momentum [among U.S. retailers] will likely be minimal” as a consequence of fourth-quarter results.
The strength of the retail numbers did not help to counter trends on Wall Street, which had its the worst day since April 20 on Thursday amid rising jobless claims and worries about the debt problems of foreign governments. The Dow Jones Industrial Average lost 268.37 points, or 2.6 percent, to end the day at 10,002.18. Retail shares slipped 2.3 percent to 392.19.
Macy’s Inc. was among the firms beating expectations, posting a 3.4 percent comp improvement and raising guidance for the fourth quarter to a range of $1.35 to $1.37 a share, excluding restructuring costs, from earlier projections of $1.14 to $1.18.
Citing “encouraging results” from the My Macy’s localization initiative, Citi broadlines analyst Deborah Weinswig boosted her earnings per share estimate to $1.38, up from $1.21, and asserted the retailer was “poised to take market share in 2010.”
Terry Lundgren, chairman, president and chief executive officer of Macy’s Inc., lauded the My Macy’s program and told WWD, “There’s been good activity in our apparel businesses. We’re probably selling more new receipts versus this time last year when we were selling mostly clearance. Inventories are in very good shape. We’re able to bring in new, fresh receipts. Private brands had a very strong finish.”
Strong performers included INC, Alfani and Tasso Elba, as well as moderate women’s apparel across the board, updated and contemporary sportswear, home textiles and housewares. Gloves, boots and coats benefited from recent cold weather, Lundgren added.
To Craig Johnson, president of Consumer Growth Partners, the evidence is pointing in the same direction: “The consumer is on the way back. We’ve been slowly digging ourselves out of a hole since September.”
Johnson, who projects a 4.6 percent increase in retail sales this year, believes luxury retailers have reached their nadir and are starting to rebuild.
“It’s like the old Texas song,” he said. “When you’re this far down, anything looks like up.”
In addition to Nordstrom’s double-digit rise, Saks Inc. registered a 7 percent increase in same-store sales, and Neiman Marcus Inc. was up 4.5 percent.
The improvements at the high end didn’t come at the expense of the continuing positive performance of retailing’s value players.
The TJX Cos. Inc. and Ross Stores Inc. posted gains of 12 percent and 8 percent, respectively, and both raised fourth-quarter guidance. BJ’s Wholesale Club Inc. and Costco Wholesale Corp. reported increases of 2.9 percent and 2 percent, respectively. Target Corp. had a 0.5 percent gain.
Although 20 of the 32 retailers monitored by WWD recorded increases — American Apparel Inc. stopped reporting on a monthly basis last month — J.C. Penney Co. Inc., Dillard’s Inc. and Stage Stores Inc. were among those missing out on the plus signs as they registered declines of 4.6 percent, 5 percent and 11.3 percent, respectively.
Kohl’s Corp. kept its winning ways with a 6.5 percent gain, and The Bon-Ton Stores Inc. was up 5.3 percent.
The strongest comp performance came from Limited Brands Inc.’s Victoria’s Secret division, which rose 17 percent, partly because of strong sales of its Miraculous bra.
VS had “broad-based selling success,” said Susquehanna Financial Group retail analyst Thomas Filandro, who forecast the intimates specialist would benefit from its focus on newness, speed to market and innovative gifting concepts for Valentine’s Day.
Also making it to double-digit territory were Gap Inc.’s Old Navy unit and American Eagle Outfitters Inc., both with 10 percent increases, and The Children’s Place Retail Stores Inc., with a 12 percent rise.
Abercrombie & Fitch Co., the most upscale of the teen retailers, checked in with an 8 percent gain after more than a year of comp declines, many of them in double digits. A&F’s increase included a 12 percent boost at the namesake division, with pickups of 10 percent and 5 percent at the kids’ and Hollister divisions, respectively.
Filandro said A&F’s quarterly comp drop-off of 13 percent was more indicative of the condition of its business. “January is not an indication at all for spring,” he said, noting that, unlike rival American Eagle, A&F has yet to deliver any spring product to stores.
One bright spot for A&F, as for many stores, was a sizeable inventory reduction. For some, inventories were too low, Filandro said, pointing to The Buckle Inc., which reported its first negative comp after 40 consecutive months of increases. The teen retailer, which had a 1.2 percent decline, ran out of men’s denim. Buckle said its comps were affected by weather trends, and by an Affliction promotion last year that was not repeated.
Unlike Buckle, Aéropostale Inc. maintained its momentum with a 6 percent increase. Mall-based retailer Hot Topic Inc. put up the day’s worst numbers with a 13.1 percent decline, as the company was unable to successfully repeat the “Twilight” product sales from last year.
Arnold Aronson, managing director of retail strategies at Kurt Salmon Associates, took the month’s numbers as an “early indication that things will get better.” He also warned stores might be reaching the end of the period when they could rely on cost-cutting to bolster their results.
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over the top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty