It could have been worse, and it might take a while for it to get better.
That was the message behind reports from retailers Thursday on January and fourth-quarter sales, which combined with 2014 forecasts from the National Retail Federation and Customer Growth Partners to paint a picture of a retail market that is likely to remain intensely promotional and highly vulnerable to the effects of harsh winter weather and a sputtering recovery for at least the first half.
NRF expects retail sales — exclusive of restaurants, automotive and gas stations — to grow 4.1 percent this year, while CGP is looking for more modest 2.8 percent growth, including apparel and accessories expansion of 2.3 percent that is led by accessories, well below the 3.8 percent growth of 2013, which was also highlighted by accessories.
But neither group expects it to be easy.
Among the small sample of stores that continue to report comparable sales on a monthly basis, January concluded with a median comp increase of 3.6 percent when drugstores were excluded, higher than the 2 percent gain expected, on average, by analysts surveyed by Thomson Reuters. Better-than-expected gains in the month from L Brands Inc. (9 percent), Costco Wholesale Corp. (5 percent) and Gap Inc. (up 1 percent versus an expected decline of 1.3 percent) helped elevate the Thomson Reuters composite number.
Thursday also brought quarterly updates from several retailers that no longer participate in the monthly reporting ritual.
Chief among these was Kohl’s Corp., which, without disclosing January sales results, reported that comparable-store sales fell 2 percent during the quarter while rising 0.8 percent in the November-December holiday period, implying, according to several analysts, a double-digit decline in the quarter’s lowest-sales month.
The Menomonee Falls, Wis.-based midtier retailer lowered quarterly profit guidance to about $1.53 a diluted share from an earlier range of $1.59 to $1.74. But it said the decrease was mainly due to “unanticipated expenses” incurred for its e-commerce business.
In adjusting the market’s bottom-line expectations, Kohl’s cited not only lower traffic, a nearly universal complaint among stores analyzing the latter part of the quarter, but “low levels of clearance merchandise” in its discussion of the sales slip in the three-month period.
The suggestion of lean inventories as the first quarter began this week helped lift Kohl’s stock 3.5 percent to $51.55 as the S&P 500 Retailing Industry Group gained 2.3 percent to 871.65 to register its first three-day winning streak of 2014. Retail stocks outperformed the Dow Jones Industrial Average and S&P 500, which both rose 1.2 percent, to 15,628.53 and 1,773.43, respectively.
Whether focused on sales and traffic or margins and inventories, fears about January and the fourth quarter had been rife. Wells Fargo analyst Paul Lejuez referred to retail stocks’ performance Thursday as a “relief rally” and said he remained cautious about the fourth-quarter earnings season and forward-looking guidance, which he believes “will be filled with cautious tones from management teams given the weak holiday period, a rough start to [the first quarter] hurt by weather, general [macroeconomic] pressures and intense competitive landscapes.”
Ann Inc. also logged a strong stock performance, rising 4.2 percent to $32.67, despite its update on a fourth quarter marked by a “lower than anticipated” performance.
The retailer said earnings and sales for the fourth quarter will exceed those of the 2012 period, but investors focused on the company’s expectation of a higher gross margin — about 49.2 percent of sales — in the quarter as they drove the stock up.
Kay Krill, president and chief executive officer of Ann, said that “soft traffic and tepid consumer spending across the industry negatively impacted us, particularly in factory outlet centers and geographic regions that experienced extreme winter weather. Looking ahead, we have entered the first quarter with clean inventories and fresh spring product at both brands.”
Comparable sales expanded 3 percent in the quarter with the Ann Taylor division’s 1 percent decline offsetting Loft’s 6 percent gain. Within those numbers, comps declined 6 percent at Ann Taylor outlet stores and were off 4 percent at Loft’s outlets.
Gap’s unexpected increase for the quarter, which matched its January rise at 1 percent, included a 10 percent decline in January at Banana Republic, as Gap brand was up 1 percent and Old Navy up 4 percent.
The San Francisco-based sportswear giant now expects earnings per share of 65 to 66 cents for the fourth quarter, above the existing consensus estimate of 60 cents. Shares jumped 4.5 percent in after-hours trading following the release of results after gaining 3.7 percent, to $39.71, during Thursday’s bullish session.
During a conference call to discuss its forecast of 4.1 percent growth in overall retail sales, NRF officials didn’t break down expectations by classification or sector, but did say that online sales are seen expanding between 9 and 12 percent within the overall projection.
Matthew Shay, president and ceo of NRF, noted, “We’re now five, six years into the recovery from our recession. The January numbers on comp-store sales make it clear that consumers are still being very careful with the way they spend their dollars.”
Even with unemployment coming down and expected to fall to about 6.5 percent in 2014, participation in the workforce continues to decline and “jobs” and “unemployment” are “fundamentally two different things,” he observed.
Both Shay and Jack Kleinhenz, NRF’s chief economist, pointed out that political uncertainty hurt consumer confidence in 2013 but many are optimistic that machinations in Washington wouldn’t cause any damage in the new year.
“We certainly created speed bumps last year,” said Kleinhenz.
Shay said he hoped greater political certainty would lead to more robust growth, which in turn would lead to “less reliance on significant promotion and the restoration of integrity of pricing.”
Still he acknowledged that “pricing is much more transparent today” because of extensive online offerings. “Consumers have been conditioned, and that will continue going into the future.”
Craig Johnson, president of CGP, said that he expected “the weakness of January to extend into the summer,” with his 2.8 percent increase based on a second half that is stronger than the first.
Within his projections for the year is a 9.4 percent increase in e-commerce, which “represents a continued deceleration of the growth rate for online. That’s the first time since people began selling online in a major way that the forecast isn’t for double-digit growth.”
Furthermore, he noted that much of the growth in e-commerce is now going to brick-and-mortar retailers who’ve diversified. “That’s good news, except when you look at ‘comp’ numbers that are blended to include e-commerce, it suggests that many of the store-only figures are negative.”
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