The clouds over retailing darkened with June’s dismal comparable-store sales results, intensifying worries about the key back-to-school and fall seasons.
Unseasonably cool, stormy weather combined with persistent weak demand and doubts about the economy to produce deep reductions in most stores’ results. As unemployment and gas prices rose — and without the stimulus checks they carried last year — consumers reduced spending on discretionary purchases or eliminated it altogether. When they did buy, shoppers looked for promotions and value.
“June comps were largely disappointing, but not surprising, given the recent spate of negative macro data,” said Lazard Capital Markets analyst Todd Slater. “Winners were helped by ‘trade-down.’ TJX was the big winner.”
The results could put pressure on the b-t-s season, and second-quarter results, said Peter Brown, vice chairman of Kurt Salmon Associates, who added comps should see a lift in September and October as retailers measure volume against the anniversary of the meltdown of the finance and credit markets.
Stores should expect a consumer who shops later and hunts for bargains, Brown said, adding one way to offset huge inventory clearances before the b-t-s/fall season would be to offer “sharper-priced merchandise” with a value focus.
June comps reflected this trend, as consumers again headed to discounters and value-oriented retailers, such as Kohl’s Corp., which fell 5.6 percent, and J.C. Penney Co. Inc., down 8.2 percent, a better showing than the 9 to 12 percent drop the retailer projected.
Among the mass merchants, The TJX Cos. Inc. recorded the best results, with a gain of 4 percent, followed by BJ’s Wholesale Club Inc., which registered a 2.7 percent increase.
The “off-price model” is “well-positioned for the new consumer reality,” Slater said.
Costco Wholesale Corp. and Ross Stores Inc. both had a 1 percent rise in comps, while discounter Target Corp. posted a disappointing 6.2 percent dip.
“Target is very well run, but maybe Target is not the new thing anymore,” Brown said.
Following the Target model, department store rival Kohl’s has been launching “relevant, trend-right” brands, Brown said, which has “resonated with its consumer.”
Despite “the very weak performance that has persisted since December 2008, there were some signs of improvement beneath the surface with a handful of teen and value retailers posting surprisingly healthy gains,” said Michael Niemira, chief economist and director of research for the International Council of Shopping Centers. “These nascent signs of improvement are important since history suggests that consumer spending typically starts off sluggish prior to significant improvement.”
Department stores focusing on value and promotions also showed signs of improvement.
While Neiman Marcus Inc. posted a 23 percent comp slide, its New York-based upscale counterpart, Saks Inc., saw comps slide just 4.4 percent as it shifted a designer promotion into the month from May. Saks still estimates second-quarter comps will decline in the mid-teen range.
Stephen I. Sadove, chairman and chief executive officer of Saks, said combined sales results for May and June give a better picture of how the business is trending, rather than June alone.
“The shift in our designer event [from May into June] obviously significantly helped the comps in June,” he said. “If you looked at the May numbers, they were down in the mid-20s, so the combined May-June results, at minus 15 or so, is a much better indicator. That’s still better than the first quarter. We are certainly seeing better trends as you go into more of a promotional mode. Everyone [at Saks] has a very good attitude and the vendors are working with us. But I don’t kid myself. It’s still a tough retail environment.”
Nordstrom Inc. reported a negative 10 percent comp but improved on its 18.6 percent decline last June, partly because of a pricing strategy that included a price-matching policy and helped it navigate the difficult environment, Thomas Weisel Partners retail analyst Liz Dunn said.
Macy’s Inc. registered a same-store sales decline of 8.9 percent.
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