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June Comps Respond To Summertime Heat

NEW YORK — Consumers took to the malls in June to beat the heat, and retailers took their cash and credit to beat their own expectations for the month.<br><br>Comparable-store results were strong enough that a large number of retailers, led by...

NEW YORK — Consumers took to the malls in June to beat the heat, and retailers took their cash and credit to beat their own expectations for the month.

This story first appeared in the July 12, 2002 issue of WWD.  Subscribe Today.

Comparable-store results were strong enough that a large number of retailers, led by Wal-Mart Stores, boosted their earnings expectations for the second quarter. Ross Stores, ShopKo, Talbots and Ann Taylor also revised upward.

During a month that in most cases extended through the Fourth of July holiday, patriotic themes abounded throughout retailing. Value continued its prevalence, nudging Wal-Mart’s comps up 7.9 percent, Kohl’s up 14.8 percent and Target’s discount stores up 6.1 percent.

While both Gap, Abercrombie & Fitch and Eddie Bauer saw the size of their comp declines contract, specialty stores with double-digit comp increases included Chico’s (15 percent), Christopher & Banks (13 percent), Limited’s flagship division (13 percent), Aeropostale (11.8 percent), Pacific Sunwear (10.5 percent) and Cache (10 percent).

“A lot of retailers are doing well with school over and people in the mood for shopping,” Russell Jones, a retail consultant at Cap Gemini Ernst & Young, said. “Most consumers make their shopping decisions based on what is in their pocketbooks, not what the business pages say.”

Steve Skinner, a partner in the retail industry group at Accenture, gave some of the credit to the merchants themselves in areas ranging from store layout to inventory control: “Retailers are just executing better. The accounting issues and the meltdown of the stock market are a drag on the consumer marketplace, but the stores overcame the negative messages people are receiving.”

Overall, Goldman Sachs’ monthly comp-store index rose 4.5 percent, ahead of the projected 4.4 percent increase and even better than last June’s 2.1 percent showing. Discount stores did the heavy work, leaping 7.4 percent, while specialty stores rose 0.1 percent and department stores remained flat as operations including Federated Department Stores, May Department Stores, Sears and J.C. Penney posted comp declines.

SPECIALTY STORES

Gap Inc.’s string of consecutive monthly declines hit 27 in June, but last month’s 6 percent drop was an improvement over the previous month’s performance as well as the company’s and Wall Street’s expectations. All units were down — Gap, 7 percent; Banana Republic, 6 percent, and Old Navy, 4 percent.

Heidi Kunz, Gap’s chief financial officer, said, “June sales results significantly exceeded our beginning-of-month projections across all brands. Total company merchandise margins improved year-over-year, driven by improvement in regular-price selling and markdown margins.” Kunz noted Old Navy and Banana Republic showed the most improvement in margins, while Gap was flat.

Limited Brands said apparel comps rose 8 percent, exceeding expectations, while inventory ended the month down 4 percent. Comps were ahead at Limited stores (13 percent), Express and Lerner New York (both 7 percent) and Victoria’s Secret stores and beauty (6 percent), but down 3 percent at Bath & Body Works.

Abercrombie & Fitch’s 5 percent comp drop was blamed on a lean inventory position. Women’s apparel comped downward but was stronger than men’s. A&F said it will continue to build inventory for the back-to-school season and expects to end the quarter at last year’s level.

Talbots and Ann Taylor Stores both comped downward (8.7 and 1.2 percent, respectively) but upped their earnings guidance for the current second quarter; Talbots to 30 cents from 29 cents and AT to a range of 29 to 30 cents from 25 to 27 cents.

Arnold B. Zetcher, Talbots’ chief executive, said in a statement, “With a very lean inventory position and better-than-expected comparable-store sales performance in both May and June, our stores will have much less clearance inventory for the remainder of our semi-annual sale event. It will benefit our second-quarter profitability, despite having a significant negative impact on our July comparable-store sales.”

their shopping decisions based on what is in their pocketbooks, not what the business pages say.”

Steve Skinner, a partner in the retail industry group at Accenture, gave some of the credit to the merchants themselves in areas ranging from store layout to inventory control: “Retailers are just executing better. The accounting issues and the meltdown of the stock market are a drag on the consumer marketplace, but the stores overcame the negative messages people are receiving.”

Overall, Goldman Sachs’ monthly comp-store index rose 4.5 percent, ahead of the projected 4.4 percent increase and even better than last June’s 2.1 percent showing. Discount stores did the heavy work, leaping 7.4 percent, while specialty stores rose 0.1 percent and department stores remained flat as operations including Federated Department Stores, May Department Stores, Sears and J.C. Penney posted comp declines.

SPECIALTY STORES

Gap Inc.’s string of consecutive monthly declines hit 27 in June, but last month’s 6 percent drop was an improvement over the previous month’s performance as well as the company’s and Wall Street’s expectations. All units were down — Gap, 7 percent; Banana Republic, 6 percent, and Old Navy, 4 percent.

Heidi Kunz, Gap’s chief financial officer, said, “June sales results significantly exceeded our beginning-of-month projections across all brands. Total company merchandise margins improved year-over-year, driven by improvement in regular-price selling and markdown margins.” Kunz noted Old Navy and Banana Republic showed the most improvement in margins, while Gap was flat.

Limited Brands said apparel comps rose 8 percent, exceeding expectations, while inventory ended the month down 4 percent. Comps were ahead at Limited stores (13 percent), Express and Lerner New York (both 7 percent) and Victoria’s Secret stores and beauty (6 percent), but down 3 percent at Bath & Body Works.

Abercrombie & Fitch’s 5 percent comp drop was blamed on a lean inventory position. Women’s apparel comped downward but was stronger than men’s. A&F said it will continue to build inventory for the back-to-school season and expects to end the quarter at last year’s level.

Talbots and Ann Taylor Stores both comped downward (8.7 and 1.2 percent, respectively) but upped their earnings guidance for the current second quarter; Talbots to 30 cents from 29 cents and AT to a range of 29 to 30 cents from 25 to 27 cents.

Arnold B. Zetcher, Talbots’ chief executive, said in a statement, “With a very lean inventory position and better-than-expected comparable-store sales performance in both May and June, our stores will have much less clearance inventory for the remainder of our semi-annual sale event. It will benefit our second-quarter profitability, despite having a significant negative impact on our July comparable-store sales.”

DEPARTMENT STORES

May Department Stores Co.’s comparable-store sales slid 1.4 percent in June. Total sales for the firm inched ahead 1.6 percent to $1.2 billion. Federated Department Stores’ same-store sales for the month sagged 0.4 percent. Overall sales, though, rose 3.2 percent to $1.33 billion.

Kohl’s Corp. continued to accelerate during the month with a 14.8 percent comp jump. Total sales for the firm’s 420 doors jumped 31 percent to $748.6 million. The Menomonee Falls, Wis.-based operation will open 32 new doors in the third quarter and about 80 stores next year. Part of Kohl’s ongoing expansion will come from the acquisition of lease designation rights for seven former Kmart locations.

Total and comparable-store sales at Dillard’s Inc. climbed 2 percent in June as 4 percent increases in the Eastern and Western divisions were offset somewhat by a flat performance in the firm’s Central region. Women’s, juniors, accessories, shoes and lingerie all saw a 4 percent sales increase for the month.

J.C. Penney Co.’s department stores comped down 0.3 percent with home and fine jewelry the strongest merchandise categories. Fashion apparel, particularly juniors, young men’s and shoes, continued to be soft from low inventory levels following better-than-planned first-quarter sales. Penney’s said inventories will be back on track for the back-to-school season. Despite the weaker-than-expected sales, the company said its bottom line in the second quarter will skew toward the positive end of its projected 10 to 15 cent loss a share.

The company reported that the Florida attorney general’s office had closed the investigation into Eckerd’s privacy and metric decimal quantity issues without finding wrongdoing on Eckerd’s part.

While comps at Sears, Roebuck & Co.’s domestic stores slid 3.8 percent, chairman and chief executive Alan Lacy said the firm’s repositioning and restructuring initiatives are proceeding. “In particular, our focus on gross margins and productivity improvements continue to contribute to improved profitability,” he said.

Saks Inc. posted a 1.2 percent same-store sales increase for the month, comprised of a 4.6 percent boost at its department stores and a 3.6 percent drop in the Saks Fifth Avenue unit.

MASS MERCHANTS

Wal-Mart Stores’ 7.9 percent comp increase was ahead of its 5 to 7 percent projected gain, prompting the discount giant to raise profit expectations for the second quarter by a penny to 44 to 45 cents a share. The corporate comp jump consisted of an 8.7 percent leap at its flagship division and a 4.1 percent rise at its Sam’s Club unit. For the full year, Wal-Mart added 2 cents to its projections and is looking for earnings of $1.76 to $1.78 a share.

A spokeswoman on a recorded call, said the upside was “driven by seasonal catch-up the first week of the month and a solid hardlines performance. Inventory appears to be in excellent shape with an increase in the low single-digit range.” Sales for the Fourth of July exceeded the firm’s expectations and were boosted, in part, by strength in apparel.

Also exceeding plan was Target Corp. with June same-store sales ahead 4.9 percent. Estimates had called for a 1 to 4 percent increase. Comps at the discount stores charged ahead 6.1 percent, partially offset by declines at Mervyn’s and Marshall Field’s of 0.1 and 2 percent, respectively.

Other value-orientated retailers prospered as well in June. While posting a 12 percent comp rise for the month, Ross Stores also upped its earnings estimates for the second quarter to 62 cents a share. Last month, Ross said improved sales trends would add as much as 3 cents to its profit expectations of 54 cents for the quarter.

ShopKo Stores’ comps rose 2.5 percent, but were strong enough for the firm to boost its second-quarter profit projections to between 19 and 21 cents a share. Previously the firm was looking for earnings of 10 to 14 cents a share.

Same-store sales for the month were up 3 percent at TJX Cos. while Stein Mart posted a 2.5 percent increase. Chiming in with declines were Factory 2-U Stores with a 6.3 percent drop and Value City Department Stores, falling 3.9 percent.