NEW YORK -- Aggressive promotions drove consumers to the stores in January, leading to better-than-expected comparable-store results in the month and lower-than-feared inventories as retailers gear up for spring...
NEW YORK -- Aggressive promotions drove consumers to the stores in January, leading to better-than-expected comparable-store results in the month and lower-than-feared inventories as retailers gear up for spring selling.
While retail analysts were generally pleased with the month-over-month gains, discounters like Wal-Mart (up 8.3 percent) and Target (up 7.6 percent) excelled, indicating continuing consumer thrift. Still, the month offered many upside sale surprises, including comp gainers American Eagle Outfitters (6.2 percent); Ann Taylor (14.6 percent); Chico's FAS (22.4 percent); The Limited and Intimate Brands Inc. (6 and 7 percent, respectively), and Talbots (7.7 percent). In addition, department store operators J.C. Penney Co. (up 5.9 percent), Saks Fifth Avenue (up 2.1 percent) and Dillard's (up 4 percent) were all better than expected.
But, as one of the least critical volume months of the year, analysts' attention was focused elsewhere. "In January, more important than the comp numbers, is to make sure the store is super clean," Christine Kilton Augustine at ABN AMRO said. "It looks as though that is the case."
December's deep discounts took the wind out of January's sales at a number of department and specialty store chains, including decliners Federated (8.8 percent), May Co. (10.1 percent), Sears (3.4 percent), Gap (16 percent), Abercrombie & Fitch (14 percent) and Eddie Bauer (25 percent). Calendar anomalies played a role, too, as the month incorporated one less week of selling for some stores.
According to the Goldman Sachs monthly comp-store index, same-store sales rose 3.4 percent in January, in line with expectations. Again, led by Wal-Mart, discounters pushed the overall index ahead, improving 7.8 percent in January. Specialty retailers receded 2.8 percent, and department stores dropped 2.3 percent from a positive 1.3 percent last year, but still better than the 4.7 percent drop expected. Twenty-three out of 50 companies monitored by WWD posted increases, versus 18 out of 49 in December. Kmart, which filed Chapter 11 on Jan. 22, didn't report.
Calling the month "successful," Steven Skinner, a partner in the retail industry group at Accenture, a management consulting firm, said: "January achieved the goal retailers set out -- to clean themselves of the mistakes of 2001 and prepare for a successful 2002." The next challenge for retail executives, Skinner said, was to wean consumers off of markdowns in order to generate greater profitability.Calling January a "very good month," Merrill Lynch broadline analyst Daniel Barry noted that 10 out of the 16 broadline firms in his coverage universe performed better last month than they have averaged over the past 12 months. With inventories in good shape heading into the new quarter, he said he believes markdowns could be down and earnings up in the spring.
Gap Inc. said its comps were down 16 percent, compared with a 12 percent decrease last year, and forecast a loss ranging between 3 and 5 cents for the fourth quarter. The company, which has been posting negative monthly results for the past 22 months, said its Gap division dropped 22 percent, Banana Republic was off 7 percent and Old Navy declined 14 percent. Analysts were expecting a 13 to 15 percent drop.
"As expected, results were driven by the continued clearance of holiday merchandise as we made room for initial spring product," Gap's chief financial officer Heidi Kunz said in a statement. "Although merchandise margins met expectations, they were well below last year due to both lower markdown margins and higher sales at markdown."
Abercrombie & Fitch and Eddie Bauer also reported lower comps, down 14 and 25 percent, respectively. The downfall at both reflects low inventory levels in January, down over 25 percent at A&F as a result of the postholiday sales in December. Both women and men comps were negative. A&F said it now expects earnings per share for the fourth quarter to exceed its previous guidance of 70 cents per diluted share.
The Limited Inc. moved into positive territory as comps improved 6 percent, which was better than expected. "The brands were successful with their clearance activity and carryover levels are below its target amounts," a company spokesman said. Apparel inventory ended the month down 15 percent per square foot at cost.
With margins up at all units, Limited division's comps gained 13 percent, above expectations; Structure's rose 14 percent; Express's increased 3 percent, and Lerner was flat.
Limited's IBI subsidiary, which the company said Monday will be reconsolidated into Limited, turned in a 7 percent comp gain, including an 11-point outburst at Victoria's Secret and a 1 percent gain at Bath & Body Works.Ann Taylor managed a better-than-expected 14.6 percent improvement. From a national perspective, Ann Taylor said it saw an improvement in downtown and tourist locations but these locations continue to lag in comparison to the rest of the company. "The strength of our January sales results was due to our aggressive promotional activity at Ann Taylor and continued product acceptance at Ann Taylor Loft," said chairman J. Patrick Spainhour in a statement. "Our historical end-of-season clearance sales generated significant sell-through of remaining fall inventory at both of our divisions."
Talbot's comps were also better than expected, up 7.7 percent, due to strong sales of clearance merchandise. However, the company said this month's performance benefited from a shift in the start of its final markdown to two weeks earlier, to January from February last year, which will negatively affect February comp results. Even so, chief executive officer Arnold Zetcher said "it was the appropriate action to take, and it has enabled us to enter 2002 in a very clean inventory position."
Other positive specialty chain performers were Pacific Sunwear, up 0.4 percent; Wet Seal, up 6.9 percent, and Urban Outfitters, up 8 percent.
Federated Department Stores' comps for the month fell 8.8 percent, but were within its projected range of a 7 to 10 percent decrease. The parent of Bloomingdale's and Macy' s also reported total fourth-quarter sales fell by 9 percent, to $5.56 billion. Same-store sales for The May Department Stores Co., parent of Lord & Taylor and Hecht's, fared slightly worse, with a 10.7 percent drop. Total sales for the fourth quarter slid 4 percent, to $4.73 billion.
Kohl's Corp.'s comps raced ahead 11.5 percent, after adjusting for an extra week a year ago. Regionally, the Northeast outperformed the rest of the country. "We were very pleased with our sell-through on clearance and the sales of basics," said a company spokeswoman.
Saks Inc.'s comps were up 2.1 percent, with a 7.9 percent increase at the department stores partially offset by the Saks Fifth Avenue unit's 4.4 percent drop. In a statement, chairman and ceo Brad Martin noted: "We are seeing positive momentum at [Saks Department Store Group] attributable to the execution of our customer-focused strategies and the diversification of SDSG's market position." Martin also said the firm's 9 percent decrease in comp inventories met plan in "both level and composition."Comparable-store revenues at The Neiman Marcus Group slid 4.4 percent overall with a 3.3 percent dip in its specialty retail segment, including Neiman Marcus and Bergdorf Goodman stores. Nordstrom Inc. comped down 2.7 percent in January.
Sears, Roebuck & Co.'s domestic comps retreated 3.4 percent and reflected "a decrease in promotional and clearance activity as a result of our improved inventory position entering the year," said chairman and ceo Alan Lacy. He added that apparel sales continue to be sluggish, while off-mall formats fared well with hardware and dealer stores. Same-store sales at J.C. Penney Co.'s department stores rose 5.9 percent with strength from women's accessories, women's apparel and home. Dillard's Inc.'s comps perked up 4 percent.
Wal-Mart Stores' comps rose 8.3 percent, while its flagship division posted a 8.6 percent increase in January, outperforming original forecasts. Total sales for the Wal-Mart division leapt 16.5 percent, to $9.56 billion, during the four-week fiscal month when sales remained strong coming out of New Year's and continued as such throughout.
On a recorded sales update, a Wal-Mart spokesman said that "the unusually high ratio of customer count to average ticket will continue to put pressure on gross margins and expenses." He added: "Apparel sales were good in several areas including boys', girls', sleepwear and outerwear."
Target Corp. comps, adjusted to take a week out of the year-ago period, advanced 5.8 percent for the corporation and 7.6 percent at the Target division. "As a result, we now expect to report earnings per share of at least 72 cents in this year's fourth quarter, compared with 61 cents a year ago," said chairman and ceo Bob Ulrich. Wall Street was looking for earnings of 67 cents for the quarter.
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