By and  on March 3, 2006

NEW YORK — Warm weather in January made retail sales hot, but the snow and cold of February created a chill in stores.

The shortest month of the year brought retailers some of the weakest same-store sales gains of the last 12 months. The month's average gain of 3.2 percent was the lowest in nine months, according to the International Council of Shopping Centers. Still, February, with a record mid-month blizzard in parts of the Northeast that iced spring apparel sales, wasn't a complete whiteout, given that retailers faced tough year-over-year sales comparisons.

Mass merchant Target Corp. posted a 3.6 percent rise in February comps, while rival Wal-Mart Stores Inc. had a 2.9 percent increase. Both were ahead of expectations and up against respective 9 percent and 4.1 percent comps from February 2005.

However, Gap Inc.'s consolidated 11 percent decline in February same-store sales — it tracks sales at stores open at least a year — came in much weaker than projections, which were for a 5.9 percent decrease. And Abercrombie & Fitch Co. said comps were up 5 percent, missing estimates of a 13.6 percent rise.

Consumers who shopped winter clearance sales and picked up early spring goods in January probably felt less compelled to shop in February, said Mark Rein, senior manager for consulting firm Capgemini's global retail practice.

Spending also may have been affected by higher home heating bills, and consumer confidence was weaker in the month.

Moderate department store chains Kohl's Corp. and J.C. Penney Co. were other winners in February with comps ahead of analysts' projections. Kohl's, which reported a 3.4 percent rise in February comps, and J.C. Penney with a 2.3 percent increase, were up against 6.1 percent and 5.9 percent same-store sales gains from last year, respectively.

Rein said the two chains benefited in February because there is a general dearth of fashion newness that would typically drive shoppers to more fashion-forward retailers.

"I'm not seeing any big new fashion trend for people to go spending money on," he said. "I'm just seeing extensions of current trends in product. I'm not seeing a new color emerge as a have-to-have color. When you're in a kind of basics mode, [department stores] can manage that really well. If there's nothing out there that's driving [spending elsewhere], they can put their operations to work."John Lonski, chief economist with Moody's Investors Service, said comps in the 57 companies he tracks rose 3.5 percent, a deceleration from January's surprising 5 percent advance, when shoppers redeemed gift cards and enjoyed unseasonably warm weather. He suggested looking at January and February comps together to "get a better indication of what the underlying pace of consumer spending is."

As a result, Lonski was upbeat, partly because of an improved U.S. job market. "One positive of this deceleration by same-store sales [in February] would be that it reduces the risk or danger that [Federal Reserve] policy might be forced to tighten [interest rates] more aggressively," he said. "The economy is doing fairly well."

Of the 50 retailers tracked by WWD, 28 posted positive February same-store sales results and 21 had negative comps. Results for Rite Aid were not available.

Among specific sectors, the mass merchants beat out both specialty retailers and department stores with a 1.8 percent aggregate February increase, while the specialty group had a 1.4 percent rise, its weakest since November 2004. Department stores had a flat month, pulled down by negative comps from Saks Inc.

The luxury sector as a whole had a mixed month; Nordstrom posted a 4.9 percent increase, which was ahead of estimates for a 3.8 percent boost, but Saks Inc.'s Saks Fifth Avenue division had a 6.7 percent decline. The retailers faced respective 7 percent and 7.1 percent increases from last year. Neiman Marcus Group came in with a 3 percent comp increase, versus a 7.7 percent gain last year.

In the specialty retail sector, American Eagle Outfitters Inc. was a strong performer with a higher-than-expected 6 percent comp increase when it was up against a 32.4 percent rise from last year. Chico's FAS turned in a 5.7 percent gain that was below analysts' expectations, but the month's sales were up against a 9.2 percent rise from last year.

To be sure, though, the specialty retail group had the most varied February comp results. For example, Talbots Inc., which had a 6 percent decrease in same-store sales, cited the midmonth snowstorm as "significantly" affecting results. Comparatively, Ann Taylor Stores Corp. had a consolidated February comp that was up 5.6 percent.Abercrombie & Fitch Co., which said last month that it expected same-store sales to moderate after January's 33 percent gain, posted a weaker-than-expected 5 percent increase in February comps. By division, the Abercrombie & Fitch brand had same-store sales that were down 6 percent, while Hollister saw a 15 percent increase.

At A&F, men's comps were strongest in knit tops, graphic T-shirts and personal care, while fleece was weak. In women's, knits, shorts and pants were strongest, while jeans and sweaters were weak. Tom Lennox, vice president of corporate relations, said on a recorded call that after benefiting from the denim boom last spring, the company is entering "this spring with jeans planned down versus last year, particularly in the feminine businesses at Abercrombie & Fitch and Hollister, where the plan was reduced significantly.

"While we are not planning to anniversary last year's huge jeans business in either women's or betty's [at Hollister], we believe that our investment in other trending classifications, including an increased build in nondenim bottoms, can offset last year's success in jeans. Going forward, jeans will continue to be a major classification generating both strong sales productivity and contribution to gross margins," Lennox said.

Wall Street punished shares of Abercrombie in Thursday trading, sending the stock down 9.2 percent to $61.05, amid a generally weak day for retail apparel stocks.

At Gap Inc., continued traffic weakness during February resulted in the consolidated 11 percent comp decline. "Traffic for the month worsened versus fourth-quarter trends, leading to lower unit sales velocity, which in turn led to significantly lower merchandise margin," Sabrina Simmons, director of investor relations, said on a recorded call. The company's strongest-performing categories were knits, cable-crew sweaters and curvy trousers in women's, and knits, sweaters and pants in men's.

"Gap is being outdone [by other retailers]," Rein said. "When you compare the options, it's not what they are doing, it's what they aren't doing. What else is available is so much more on point with what people are looking for."

On the positive side, Limited Brands Inc. posted a better-than-expected 5 percent increase in consolidated comps. "Customers continue to respond favorably to the Angels Secret Embrace bra, and Pink also delivered a strong performance," the company said on a recorded call.J.C. Penney said on a call that the best-performing category in February was fine jewelry, led by strong Valentine's Day merchandise sales. There was also strength in family footwear, home and men's. The company added that initial customer response to recently launched brands — a.n.a, Miss Bisou, Studio, RULE by Steve Madden and Solitude — has been good.

FEBRUARY SAME-STORE SALES
 
February
January
December
 
2006
2005
2005
2005
 
% Change
% Change
% Change
DEPARTMENT STORES
Bon-Ton
-1.6
-2.5
0.9
0.8
Dillard’s
-2.0
5.0
3.0
1.0
Federated
1.0
1.8
1.0
3.4
Gottschalks
2.7
-0.6
0.3
3.7
Kohl’s
3.4
6.1
2.0
4.6
Neiman Marcus
3.0
7.7
4.1
8.6
Nordstrom
4.9
7.0
6.0
7.7
J.C. Penney
2.3
5.9
2.5
2.2
Saks Dept. Store Group
-6.1
0.9
4.3
1.8
Saks Fifth Ave. Enterprises
-6.7
7.1
3.7
3.1
Stage Stores
-0.9
3.7
1.4
7.3
Average:
0.0
3.8
2.7
4.0
 
SPECIALTY CHAINS
Abercrombie & Fitch
5.0
19.0
33.0
29.0
Aéropostale
-5.4
13.4
12.3
11.4
American Eagle
6.0
32.4
11.3
9.8
Ann Taylor
5.6
-5.4
10.9
1.5
Banana Republic
-11.0
-6.0
-6.0
-5.0
Bath & Body Works
4.0
3.0
-2.0
1.0
Bebe
1.6
25.3
9.8
1.1
Buckle
-0.4
6.4
3.0
-1.3
Cache
-3.0
3.0
0.0
4.0
Cato
-7.0
7.0
6.0
-2.0
Chico’s FAS
5.7
9.2
14.6
16.4
Christopher & Banks
-6.0
5.0
-3.0
2.0
Citi Trends
11.7
13.0
22.7
21.4
Claire’s
4.0
6.0
9.0
4.0
CVS
5.9
-0.1
5.4
7.3
Deb Shops
5.1
1.8
11.6
4.5
Dress Barn
5.0
15.0
16.0
8.0
Gap (U.S. stores)
-7.0
-2.0
3.0
-10.0
Guess
8.6
1.8
31.0
17.5
Hot Topic
-8.4
0.2
-0.7
-6.2
Limited Brands (total apparel)
5.0
-15.0
-4.0
5.0
Mothers Work
-2.2
-2.3
3.9
3.5
New York & Company
-12.8
9.8
0.6
10.9
Old Navy
-14.0
-1.0
0.0
-10.0
Pacific Sunwear
-3.1
10.5
4.9
1.0
Rite Aid
NA
0.6
0.9
3.9
Talbots
-6.0
8.1
0.8
1.1
United Retail
-1.0
13.0
15.0
16.0
Victoria’s Secret
5.0
1.0
3.0
4.0
Walgreen
5.7
9.3
7.4
6.2
Wet Seal
29.3
16.4
51.4
38.5
Wilsons
-9.3
7.8
-12.7
-7.7
Zumiez
28.0
10.3
23.2
20.9
Average:
1.4
6.6
8.6
6.3
 
MASS MERCHANTS
Retail Ventures
5.6
1.5
5.6
3.2
Ross Stores
6.0
6.0
9.0
6.0
Stein Mart
-8.5
6.2
-0.4
-6.1
Target
3.6
9.0
5.2
4.7
TJX Cos.
1.0
6.0
5.0
6.0
Wal-Mart (discount stores)
2.9
4.1
4.0
1.9
Average:
1.8
5.5
4.7
2.6
 
TALLY
Up
28
41
41
42
Flat
0
0
2
0
Down
21
9
7
8
 
49
50
50
50
Source: company reports

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