A bit of late-month traction was insufficient to pull Gap Inc.’s sales out of reverse last month.
This story first appeared in the March 7, 2014 issue of WWD. Subscribe Today.
Reporting last — after the close of the markets Thursday — Gap’s numbers were in the uncustomary recent position of also being least, with comparable sales for the month down 7 percent, versus expectations among analysts for a 0.9 percent increase. Even net sales pulled back 3.8 percent for the four-week month, to $929 million from $966 million.
By brand, Gap suffered the most, with comps down 10 percent, followed by Banana Republic, down 7 percent, and Old Navy, down 6 percent.
Gap’s poor showing lowered the Thomson Reuters same-store sales index for the month to a gain of 1.8 percent, below the 2.8 percent median result expected. With the surprise decline, the median increase excluding drugstores was 0.3 percent, the weakest showing since a 2.4 percent pullback in August 2009.
RELATED STORY: February Sales Improve Late in Month >>
While the bulk of the shortfall was attributed to February’s vicious winter weather, which hurt results in the Northeast and Midwest regions of the U.S. as well as in its Japanese stores, Gap indicated that it will again face pressure in March as the late timing of Easter — occurring on April 20, three weeks later than in 2013 — is expected to push sales into April at the expense of the current month.
“A later Easter is actually more favorable on a net basis for driving sales, largely because it is warmer,” noted Michael Niemira, vice president, director of research and chief economist for the International Council of Shopping Centers.
On a recorded call, Katrina O’Connell, Gap’s vice president of investor relations, noted that more than 450 of the company’s stores, just more than one-seventh of its fleet, were closed for at least one day because of the stormy weather and that sales trends improved in the second half of the month. The final week of February was the strongest of the lot and the second week the weakest.
She also pointed out that February is the lowest-volume month of the first quarter.
Gap shares fell 0.8 percent to $42.29 in regular trading Thursday but dropped another 4 percent, to $40.60, in after-hours trading following the sales announcement.
The few remaining stores still reporting monthly same-store sales felt less of a jolt from the weather and many exceeded expectations as less severe conditions and perhaps a hint of pent-up demand from consumers suffering from cabin fever lifted sales late in the month.
Both L Brands Inc. and its flagship Victoria’s Secret division beat expectations with matching comp increases of 2 percent last month, although Bath & Body Works missed the 2.4 percent advance expected with a 1 percent gain.
John Cato, chairman, president and chief executive officer of Cato Corp., was pleased with his firm’s 1 percent increase in comps, which came against expectations of a 2 percent decline. He said the impact of winter storms early in the month, affecting even locations to the south of Cato’s Charlotte, N.C., headquarters, “was offset by strong selling in the last two weeks of the month, driven by warmer weather and tax refund spending.”
The two remaining teen retailers in the comp mix both exceeded expectations — The Buckle Inc. with a 1.4 percent decrease and Zumiez Inc. with a 2 percent increase. Stein Mart Inc., fresh off a 3.7 percent comp increase for all of 2013, began the fiscal year on a sour note, with its comps down 2.1 percent against the 2.5 percent increase anticipated, on average, by analysts. Stein Mart’s was the second largest downside surprise of the month behind Gap.
In addition to the challenging weather, results were depressed by a clear shortage of exciting new trends, according to Barbara Kahn, the Patty and Jay H. Baker professor of marketing at The Wharton School.
“We’re seeing a bit of an uptick in consumer confidence,” she said. “People think we’re really starting to come out of a long slump, but I don’t think people right now see a strong reason to buy, as they might have with color a year ago. The stores seem locked in a vicious circle of high inventories and lots of promotions on items people already have seen.”