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Fashion Boom: Luxury Shoppers Nourish Strong Comp-Sales

Same-store sales for major retailers eased back in April, as cooler temperatures in key markets tempered consumer spending.

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NEW YORK — Forget that the stock market fell 69 points on Thursday and that April comparable-store sales were down from March. There are luxury goods and colorful fashions in stores — and shoppers are gobbling them up.

This story first appeared in the May 7, 2004 issue of WWD.  Subscribe Today.

Clothing and shoes were a bright spot in an otherwise tepid April, which was chilled by an early Easter as well as abnormally low temperatures in key markets. In fact, the apparel sector has reported dramatic growth — $20 billion on a year-over-year basis — so it isn’t surprising that comps flexed muscle at high-end department stores and specialty retailers.

For example, the Neiman Marcus Group continued its run with a 14 percent gain while Nordstrom posted a 10 percent increase. Saks Fifth Avenue Enterprises reported a 4.3 percent gain, which was lower than March due to a shift in the retailer’s marketing activity.

Consumer spending on apparel and fashion footwear jumped 7.3 percent to $326.9 billion in the first quarter of this year from $304.8 billion in the same period last year, according to the latest quarterly data from the Bureau of Economic Analysis, an agency of the U.S. Department of Commerce. Expenditures on the segment were up 11.6 percent compared with the first quarter of 2000.

While pent-up demand may help explain part of that increase, Richard Hastings, a credit economist with Bernard Sands, said it has more to do with the strength of the affluent consumer. “In this economy there’s a class of consumer now immune to inflation associated with higher grocery prices or higher gas prices,” said Hastings.

In keeping with trends, the high-end department store channel blazed its own trail during April, with most besting comp estimates for the month. Misfires from key moderate department store players, May Department Stores and Kohl’s in particular, weighed down the channel.

Cool spring weather in the Northeast, rising gas prices and anticipation of a rise in interest rates had an impact on overall results. The Goldman Sachs Retail Comparable-Store Sales index showed a 3.9 percent gain in April, compared with a 6.8 percent gain reported in March.

Still, of the 50 retailers tracked by WWD, 36 posted higher numbers. The specialty store segment took the lead, posting an average comp increase of 4.8 percent for the month, compared with a boost of 6.2 percent reported in March. Mass merchants recorded an average gain of 3.9 percent, down from an 8.2 percent gain in the previous month. Buoyed by its high-end cohorts, the department store channel posted a 1.7 percent gain, down from 8 percent.

“Results were erratic,” Smith Barney analyst Deborah Weinswig said in a research report. “In our view, a strong product offering was a key differentiator this month with respect to sales performance. More specifically, retailers with differentiated merchandise (e.g., Federated, J.C. Penney and Neiman Marcus) outperformed those with weaker apparel statements.”

Kurt Barnard, consultant and founder of Barnard’s Retail Trends report, echoed this sentiment. “Color is back very much in the forefront,” said Barnard. “Fashions that catch the eye are really important; things that are a little unusual, a little out of the ordinary.”

The earlier Easter holiday, something most retailers and analysts believed would negatively impact results, also seemed to have little effect on the high-end retailer. According to the Nordstrom sales call, the earlier Easter holiday season “had no material impact.” Sales accelerated during the last two weeks of the month and full-priced selling remained strong, the retailer said.

Retailers in the specialty store channel continued to draw customers with colorful spring merchandise as well as new summer offerings.

Aeropostale’s 18.9 percent comp increase was driven by women’s polos, women’s capris, bags, swimwear and flip-flops, according to the company’s sales call. Men’s wear led the way with gains in the low 20s while women’s increased in the mid-teens.

It was a similar story for Pacific Sun, with men’s T-shirts and denim pants as the leading categories. Sneakers and sandal sales were up more than 20 percent.

As comps were released on Thursday, Wall Street wasn’t thinking about sneakers or sandals or same-store sales. The Street was speculating on rising interest rates and its impact on retail share prices. SG Cowen equity analyst Lauren Cooks Levitan offered an optimistic take in her research note.

“While it appears that rising interest rate fears are likely to continue to pressure [specialty retailers], we believe some valuation levels for high-quality retailers have retreated to a point where we are willing to look past potential interest rate pressure,” Levitan wrote. “Further, we note that we do not think increased interest rates will have a significant impact on demand for retailer’s product — given a rise in interest rates would correspond with sustained improvements in the economy and improved consumer confidence.”

Barnard agreed. As affluent consumers drive sales of luxury goods, he said specialty stores are gaining ground because of the improving economic outlook. “Consumer spending and retailing are a function of one four-letter word: jobs,” said Barnard. Jobs, more than interest rates or gasoline prices, have a greater impact on sales behavior, he said.

And he sees no reason for trends among high-end retailers to curb anytime soon. “This is part of a longer cyclical wave of buying,” said Hastings, who believes a fashion boom began in late 2002. “By late 2002 there was a move toward a more contemporary appearance,” said Hastings. At that time, he said, new fashions and new styles with unique colors came to the fore. This had a ripple affect, extending into other areas where the high-end retailers reigned.

“The social mood embraced a much prettier look, which fueled high demand for footwear, accessories and cosmetics,” said Hastings.

April Same-Store Sales
April 2004
March 2004
February 2004
January 2004
DEPARTMENT STORES
Bon-Ton
(4.2)
(1.7)
0.4
(5)
Dillard’s
1
3
2
2
Federated
5.4
6.8
9
5.5
Gottschalks
(0.8)
11.2
2.3
8.6
Kohl’s
(4.6)
(0.9)
6.6
0.3
Marshall Field’s
0.6
9.9
6.5
4.3
May Co.
(8.1)
10.1
2.6
5.3
Mervyn’s
(6.6)
0.8
1.4
(3.5)
Neiman Marcus
14
25.7
24.4
12.8
Nordstrom
10
15.9
8.8
8.7
J.C. Penney (dept. stores)
5.3
11.4
12.1
6.4
Saks Dept. Store Group
10.6
1.9
8
3.3
Saks Fifth Ave. Enterprises
4.3
20.6
25.2
10.9
Sears Roebuck (U.S. stores)
(1.8)
0.1
1.1
4.6
Stage Stores
0.3
5.5
8
2.1
Average:
1.7
8
7.9
4.4
SPECIALTY CHAINS
Abercrombie & Fitch
0
(1)
1
2
Aeropostale
19.3
14.2
26.4
17.7
American Eagle (U.S. stores)
8.3
7.6
15.2
0.6
Ann Taylor
9.6
12
15.3
3.7
Banana Republic
12
25
30
(1)
Bebe
10
20.5
24.2
4.8
Buckle
8.6
14.2
10.8
0.5
Cache
8
12
18
10
Cato
(2)
(1)
(2)
(8)
Charming Shoppes
4
4
8
()3
Chico’s FAS
16
18.9
28
19.5
Christopher & Banks
(3)
(7)
(7)
(15)
Claire’s
9
10
15
10
Deb Shops
1.4
(5.2)
12.7
5
Dress Barn
6
9
5
5
Gap (U.S. stores)
3
5
6
6
Goody’s Family Clothing
1.8
0.3
14.4
(1.6)
Guess
17.5
13.8
14.8
9.5
Hot Topic
0.7
3.9
7.6
4.7
Limited Brands
2
15
5
23
Mothers Work
(0.4)
()6.3
7.8
2
Old Navy
3
11
16
3
Pacific Sunwear
11.4
12.4
14.1
12.4
Talbots
0.3
1.1
5.8
(11.8)
United Retail
(3)
(4)
1
(5)
Walgreen
10.3
12.6
11.8
9.1
Wet Seal
(16.8)
(21.1)
()12.5
()21.4
Wilsons
(3.5)
(2.6)
(0.8)
(0.8)
Average:
4.8
6.2
10.4
2.9
Mass Merchants

Retail Ventures
(0.2)
4.1
10.5
(1.2)
Ross Stores
2
7
0
4
ShopKo
4.3
5.2
2
3.2
Stein Mart
6.7
18.4
7.6
5.7
Target (discount stores)
6.2
7.8
8
5.1
TJX
5
9
10
2
Wal()Mart (discount stores)
3.6
5.6
6
5.3
Average:
3.9
8.2
6.3
3.4
Tally:

Up
36
40
45
38
Flat
1
0
1
0
Down
13
10
4
12
Total
50
50
50
50
Figures represent percent change of year-over-year same-store sales.
SOURCE: COMPANY REPORTS. PARENTHESES INDICATE DECLINES.
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