Cold weather and markdowns delivered better-than-expected January comparable-store sales, giving retailers a much-needed pick-me-up after a lukewarm holiday season.
The strong results made for a nice send-off, as Kohl’s Corp., Macy’s Inc., Nordstrom Inc. and Target Corp. have opted to cease reporting monthly comps going forward. Gap Inc. said Thursday that while it would continue reporting comps, it would release results after market, instead of before the market opens. That will leave only 13 retailers reporting monthly comps.
Even as analysts lamented the lack of clarity that comps will provide moving ahead, they also largely agreed that January results hadn’t really offered up much insight into the health of retail either.
January comps expanded 4.5 percent versus last year and marked the “strongest” performance since September 2011’s 5.5 percent gain, according to the International Council of Shopping Centers. RELATED STORY: January Comp Crux >>
The comp gains did little to help retail stocks on Wall Street. The S&P 500 Retailing Industry Group fell 0.3 percent, or 1.98 points, to 699.13. The decliners included Limited Brands Inc., off 3.3 percent to $45.68, and Gap, down 3 percent to $32.23.
“Despite worries of a ‘fiscal drag’ due to higher payroll taxes, consumers were out shopping for bargains and clearance items,” said Michael Niemira, ICSC vice president of research and chief economist, who anticipates sales to “moderate” to a 2.75 percent to 3 percent rate in February.
“This is not sustainable,” Morgan Stanley analyst Kimberly Greenberger said, of January’s strong results. “We are very, very concerned about the macro environment.”
The analyst cited higher social security and payroll taxes, as well as less-than-exciting incoming fashion trends, as upcoming headwinds.
Drilling down deeper into January results, Greenberger said retailers benefited from a long New Year’s holiday that shifted into the workweek. Mall traffic surged in the midteen range as a result and lifted flagging traffic toward the end of the month.
Cold weather, gift card redemptions and steep discounts drove customers to shop in-store or online, as they clamored to grab deals on winter apparel. Now that traffic patterns have normalized, the analyst expects traffic to “resume” to a 1 to 2 percent decline, which isn’t great news for mall-based retailers such as Gap Inc.’s namesake label.
In the midst of a recovery of sorts, the Gap is finally pulling positive comps, after more than a decade of negative trends.
“The product has looked genuinely better across all three brands, the Gap, Old Navy and Banana Republic,” Greenberger said, while noting that good product won’t be able to outweigh macroeconomic headwinds. “That probably won’t be sustained.”
David Bassuk, managing director at retail consulting firm Alix Partners, agreed that retail’s January momentum would most likely be dampened moving ahead. This is due in part to the continued “bifurcation” that is taking place between the luxury consumer and the value-conscious consumer.
Driven by strength in the stock market, the luxury shopper continues to buoy retail, as higher taxes will hamper shoppers with less disposable income, he said, adding, “2013 will be a tale of mixed results once again.”
Although the fiscal cliff issue didn’t have a “dramatic effect” on spending, upcoming budget talks in Washington, D.C., will likely play a role in continued consumer caution, Bassuk noted. The consultant also said that while e-commerce has grown extensively for retailers, it’s getting “more competitive and much more difficult to make money” in the channel.
“Shipping costs are high and consumers are expecting free shipping,” he explained, noting that with possible changes in the U.S. Postal Service’s delivery policies, rival carriers may increase their prices, which could impact online retail.
Still, it’s not all doom and gloom.
Brands that continue to deliver great product quickly are excelling, offered Nancy Liu, retail strategist at Kurt Salmon Associates.
“The dynamics of the economy means the consumer will continue to look for value,” Liu said. “Retailers that balance innovation with inventory management are prospering.”
The consultant called out Macy’s and Nordstrom for its strong merchandising, planning and promotional strategies. Both retailers pulled double-digit comp gains, 11.7 percent at Macy’s and 11.4 percent at Nordstrom.
That said, Liu noted that quarterly profit margins will likely take a hit, as many of the retailers had to run steep, unplanned promotions to clear out excess inventory.
“It’s hard now that same-store sales reporting is so spotty,” she said, as she searched for more clarity on inventory levels across the different sectors.
Liu expects more retailers to stop reporting monthly sales, now that only two department stores, The Bon-Ton Stores Inc. and Stage Stores Inc. will be reporting from the department store sector, and the largest remaining company, Target, won’t be weighing in either.
“I can see more companies dropping off,” she said. “Comps are becoming less and less of a true barometer of what’s going on in the industry.”
London’s newly opened @designmuseum will look back on the life and work of Azzedine Alaïa in a show that the designer helped to curate before he died of heart failure last month. The retrospective, which Alaïa had worked on with Mark Wilson, chief curator of the @groningermuseum, will look at the impact of his work worldwide. The show, “Azzedine Alaïa: The Couturier,” will run from May 10 to October 7. Read more about the exhibit on WWD.com #wwdnews #wwdfashion (📷: @zefashioninsider)
@Pharrell and his wife Helen Lasichanh were among the stars that came out to celebrate @rimowa’s first pop-up concept shop. The space, which is located on Rodeo Drive in Beverly Hills, draws inspiration from airport luggage carousels and lounge areas – and features the company’s luggage and accessories. If the pop-up is successful it could pave the way for addition temporary shops throughout the world. #wwdfashion (📷: Owen Kolasinski/BFA)
@carineroitfeld celebrated @crfashionbook’s first calendar last night with a dinner party at Spring Place in Manhattan. Photographed by @stevenkleinstudio, the calendar takes on a fitness theme and features @joansmalls, @gigihadid, @danielle_herrington_ – pictured here – and more. “[Carine Roitfeld] wanted me to feel sexy and she wanted me to be myself and feel it out on my own and do what I felt was right,” said Herrington, aka Miss October. #wwdeye
@saintrecords and @virgilabloh last night at @americanexpress’ “A Night With Success Makers” event. “I always bring it back to community because without that I wouldn’t have the courage,” said Knowles when asked how she has gotten where she is now. Read more highlights from their conversation on WWD.com. #wwdeye (📷: @lizdoupnik)
This Just In: Industry sources have told WWD that Anastasia Soare is rumored to be considering selling her beauty business, @anastasiabeverlyhills. According to those sources, Soare has tapped investment bank Imperial Capital to explore sale options for her eponymous beauty brand –– and with at least $340 million in net sales, this would be a big deal. Put in context of other recent transactions for makeup companies, Soare’s price tag could be in the billions if she were to sell the whole thing. #wwdnews #wwdbeauty (📷: @clint_spaulding)
@assouline’s latest book, “The Spirit of Bentley: Be Extraordinary” captures the adventurous attitudes and opulent lifestyles of @bentleymotors’ most creative owners and enthusiasts throughout the U.K. The 292-page hardcover has a section dedicated to showing its team of skilled artisans and photos of its most colorful owners, from George Bamford to designer @alicetemperley, pictured here by Aline Coquelle. #wwdeye
@google released its report on the most popular search terms this year. For fashion brands, the list was led by @gucci, the luxury brand that stunned the market last October when it pledged to stop using fur. Runner ups were @supremenewyork and @fashionnova, along with more established brands like @louisvuitton, @chanelofficial and @ysl. #wwdfashion (📷: @aitorrosasphoto)
In yet another fashion show shuffle, @elleryland is moving its show in sync with the Paris couture calendar — though the brand is still keeping one foot on the city’s ready-to-wear schedule. Their runway show in January will coincide with the launch of a new strategy: designing two main collections each year instead of four, which will then be released in four drops. “As we all know, the system needs to change. We need to show sooner to give time back to artisans and designers to do what they do best — create,” said founder Kym Ellery. #wwdnews #wwdfashion (📷: @kukukuba)
@maxmara’s classic 101801 coat was the cornerstone of its pre-fall 2018 collection. The design team expanded the traditional double-breasted, kimono-sleeved style into a trapeze coat, lean belted styles and a peacoat and presented them in monochromatic looks – like the camel one pictured here. #wwdfashion #prefall18 (📷: George Chinsee)