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Retailers reporting September comparable sales on Thursday fell short of analysts’ expectations, their own plans and in many cases their prior-year revenues as weak traffic trends worsened throughout the month.
This story first appeared in the October 11, 2013 issue of WWD. Subscribe Today.
Perhaps the biggest disappointment came from the last company to report. Gap Inc., issuing its September figures following the close of the equity markets, said corporate comps fell 3 percent as all three of its brands reported declines — 3 percent at Gap, 2 percent at Old Navy and 5 percent at Banana Republic. Analysts polled by Thomson Reuters had expected the overall number to grow 1.6 percent, with projected increases of 2.8 percent at Gap, 0.7 percent at Old Navy and 1.6 percent at Banana Republic.
In a recorded message, the company noted that traffic in its stores decelerated, especially in the last week of September, as the government shutdown and the status of the debt ceiling became a greater concern to would-be shoppers. Glenn Murphy, Gap’s chairman and chief executive officer, said, “While September proved to be somewhat challenging, we remain steadfast in our commitment to deliver on our full-year goals.”
Among those goals, laid out in guidance issued in August, were for earnings of $2.57 to $2.65 a diluted share and an operating margin of 13 percent of revenues.
Thomson Reuters said the overall result among comp reporters was an increase of 3.2 percent, which was cut in half, to 1.6 percent, when the hot drugstore sector was excluded. The 1.6 percent nondrug figure compares to an estimate of a 3.1 percent increase.
Prior to Gap’s late-afternoon report, the International Council of Shopping Centers said that September chain-store sales were up 4 percent, led by a 6 percent increase at drugstores. Apparel was identified as the weakest segment, rising just 0.1 percent without Gap’s inclusion.
L Brands Inc., formerly Limited Brands, also fell short of expectations, with increases of 1, 2 and 3 percent at Victoria’s Secret, Bath & Body Works and La Senza, respectively, all falling below consensus estimates. The company said merchandise margins were down for the month and below its own plan “as we were more promotional than initially planned to drive traffic.”
Outside of the L Brands nameplates, the only stores tracked by WWD to post increases were Costco Wholesale Corp. and Stein Mart Inc., both with comp increases of 5 percent.
Ending a string of 27 consecutive months with comp increases, American Apparel Inc. was off 6 percent for the month, with an 8 percent decline in same-store sales offset by an 8 percent increase in e-commerce. The company cited both “weak consumer spending levels across the retail apparel sector,” in the words of chief financial officer John Luttrell, and problems getting its new California distribution center up and running for the shortfall.
Among teen retailers, Zumiez Inc.’s 0.6 percent decline matched expectations while The Buckle Inc.’s 4.5 percent decline, against an expected 1.2 percent increase, was the month’s biggest “miss.”