Sluggish February same-store sales turned investors' fears into a reality.
Across the board, retailers reported lackluster comps Thursday, sending stocks in the sector spiraling.
The department store channel was hardest hit, with retailers such as J.C. Penney Co., The Bon-Ton Stores Inc. and Nordstrom Inc. delivering weak results.
The WWD Composite Index lost 2.3 percent to 848.72, while the S&P Retail Index nosedived 4 percent to close at 373.34. The Dow Jones Industrial Average fell more than 200 points to close down 1.8 percent at 12,040.39 and the broader S&P 500 dipped 2.2 percent to 1,304.34. While some February results exceeded estimates, consumers were still reluctant to shop and were eager to snag a bargain, making discounters the biggest winners.
"With an increase in gas prices, food inflation and turmoil in the housing market, retailers with a value-oriented message continue to benefit," said Chris Donnelly, partner at Accenture's Retail Practice.
Of the retailers tracked by WWD, the mass merchant sector had an average gain of 1.8 percent. Department stores had an average decline of 4.6 percent, while the specialty sector fell 0.9 percent. Looking at total net sales for the month, department stores lost 1.8 percent, the mass merchants grew 6.8 percent and the specialty sector soared 16.5 percent.
While February remains a relatively unimportant month in the retail calendar, analysts expect continued volatility and aggressive clearances heading into the summer.
"Although the March-April time period will be the first key test for 2008, it is already obvious that spring season will be one of tempered guidance and results," said Eric Beder, retail analyst at Brean Murray Carret & Co. "The key for many players will be their ability to minimize inventory exposure to allow them to capitalize on some key fashion trends and surprise investors. Discipline remains the watchword for 2008."
With Easter coming earlier this year, retailers will lose one sales day in March, which could translate into a decrease of 250 to 400 basis points for same-store sales, according to Richard Jaffe, analyst at Stifel Nicolaus. He expects retailers to make up this loss in April.
But experts agree comps will not turn positive until at least the second half of the year. "Last year was a great year, so even if things start to shape up, it won't be evident until companies start to anniversary easier comps," said Donnelly.
The only silver lining has been retailers' attempts to cut expenses, manage inventory levels and slow store growth, said Thomas Filandro, retail analyst at Susquehanna Financial Group.
Department stores continue to struggle with Kohl's slipping 3.8 percent and Penney's plummeting 6.7 percent. Penney's said women's and children's apparel and family footwear were the best-performing categories. The company expects a low-single-digit decrease in March comps.
Macy's Inc. announced last week that it would discontinue reporting same-store sales figures. The midtier department store joins New York & Company Inc., Bebe Stores Inc. and Guess Inc., among retailers, who have moved away from reporting monthly numbers.
Even high-end retailers were not immune to consumers tightening their purses. Neiman Marcus Group Inc. sank 7.3 percent and Nordstrom dropped 5.8 percent, its third straight month of comps decline.
Saks Inc. was the only department store that remained positive, gaining 3.4 percent. The company said its strongest categories were men's shoes, accessories, contemporary apparel, fine jewelry and fragrances. Women's classic bridge apparel, petites, large sizes and designer eveningwear continue to struggle.
In the discount channel, retail giant Wal-Mart Stores Inc. posted a 2.5 percent jump for the month, topping the consensus forecast of 1 percent. The company said it saw strength in the grocery, health and wellness and entertainment segments, and sales trends in apparel improved compared with the last several months.
Rival Target Corp. grew 0.5 percent, in line with company guidance and beating expectations of a 0.5 percent decline.
Shoppers trading down also boosted warehouse clubs Costco Wholesale Corp. and BJ's Wholesale Club Inc., which reported 7 percent and 5.9 percent gains, respectively.
Off-pricers TJX Cos. and Ross Stores Inc. saw a 3 percent and 4 percent growth, respectively, capitalizing on opportunities to acquire better brands as department stores and specialty retailers pushed back and canceled orders.
Taking the final spot on the mens’ portion of New York Fashion Week calendar next month will be none other than @tomford. Though he’s shown his men’s wear in New York in the past, this will mark the first time the designer has shown his men’s collection alone during New York Fashion Week: Men’s. His runway show will debut on February 6 at the Park Avenue Armory. #wwdfashion
London-based couture house @ralphandrusso has certainly been in the spotlight, having its dresses worn by @beyonce, Angelina Jolie, Meghan Markle in her engagement photos and more. For couture, Tamara Ralph focused on ornamentation — think: feathers with chain mail, jet embroidery and clusters of pearls and crystals. See the rest of the collection on WWD.com #wwdfashion #couture (📷: @giovanni_giannoni_photo)
Minnie Mouse celebrated her 90th birthday by getting her own star on the Hollywood Walk of Fame. For her celebratory luncheon, @coach’s creative director @stuartvevers dressed her in a custom made prairie dress, complete with Vever’s take on the polka dot – black sequined versions – under a cropped motorcycle jacket. The designer also put his own mark on Minnie’s classic red shoes, infusing the color with sparkles and adding some Coach crystals. “We chose colors that were very Minnie and also represented quintessential Coach elements,” said Vevers. #wwdfashion #nationalpolkadotday (📷: George Chinsee)
@nickjonas is unveiling his first-ever apparel collection through a partnership with John Varvatos. The limited-edition capsule, which makes its debut in spring, also marks the first time the designer has collaborated with anyone on a line. “The process in working with Nick is amazing. It’s inspiring to be around someone who is not only connected with the trade that they do, but also with what’s happening in the environment around him, and how that connects to what we do with style,” said Varvatos. (RG: @johnvarvatos) #wwdfashion
@margotrobbie steps out onto the red carpet wearing @miumiu. The actress is nominated for “Outstanding Performance by a Female Actor in a Leading Role” in “I, Tonya” at the #SagAwards. (📷: Stewart Cook) #wwdfashion
For @massimogiorgetti of @msgm, the Nineties are his favorite decade. “They had a huge impact on my personal growth. What I like of the Nineties is that they are not so precise in terms of style as other decades…there was actually a bit of everything,” he said. As seen on MSGM’s Spring 2018 show: tie-dye and a bit of grunge, two styles that are synonymous with the decade #wwdfashion #wwddecades (📷: @kukukuba)