It could have been worse, and it might take a while for it to get better.

This story first appeared in the February 7, 2014 issue of WWD. Subscribe Today.

That was the message behind reports from retailers Thursday on January and fourth-quarter sales, which combined with 2014 forecasts from the National Retail Federation and Customer Growth Partners to paint a picture of a retail market that is likely to remain intensely promotional and highly vulnerable to the effects of harsh winter weather and a sputtering recovery for at least the first half.

NRF expects retail sales — exclusive of restaurants, automotive and gas stations — to grow 4.1 percent this year, while CGP is looking for more modest 2.8 percent growth, including apparel and accessories expansion of 2.3 percent that is led by accessories, well below the 3.8 percent growth of 2013, which was also highlighted by accessories.

But neither group expects it to be easy.

Among the small sample of stores that continue to report comparable sales on a monthly basis, January concluded with a median comp increase of 3.6 percent when drugstores were excluded, higher than the 2 percent gain expected, on average, by analysts surveyed by Thomson Reuters. Better-than-expected gains in the month from L Brands Inc. (9 percent), Costco Wholesale Corp. (5 percent) and Gap Inc. (up 1 percent versus an expected decline of 1.3 percent) helped elevate the Thomson Reuters composite number.

Thursday also brought quarterly updates from several retailers that no longer participate in the monthly reporting ritual.

Chief among these was Kohl’s Corp., which, without disclosing January sales results, reported that comparable-store sales fell 2 percent during the quarter while rising 0.8 percent in the November-December holiday period, implying, according to several analysts, a double-digit decline in the quarter’s lowest-sales month.

The Menomonee Falls, Wis.-based midtier retailer lowered quarterly profit guidance to about $1.53 a diluted share from an earlier range of $1.59 to $1.74. But it said the decrease was mainly due to “unanticipated expenses” incurred for its e-commerce business.

In adjusting the market’s bottom-line expectations, Kohl’s cited not only lower traffic, a nearly universal complaint among stores analyzing the latter part of the quarter, but “low levels of clearance merchandise” in its discussion of the sales slip in the three-month period.

The suggestion of lean inventories as the first quarter began this week helped lift Kohl’s stock 3.5 percent to $51.55 as the S&P 500 Retailing Industry Group gained 2.3 percent to 871.65 to register its first three-day winning streak of 2014. Retail stocks outperformed the Dow Jones Industrial Average and S&P 500, which both rose 1.2 percent, to 15,628.53 and 1,773.43, respectively.

Whether focused on sales and traffic or margins and inventories, fears about January and the fourth quarter had been rife. Wells Fargo analyst Paul Lejuez referred to retail stocks’ performance Thursday as a “relief rally” and said he remained cautious about the fourth-quarter earnings season and forward-looking guidance, which he believes “will be filled with cautious tones from management teams given the weak holiday period, a rough start to [the first quarter] hurt by weather, general [macroeconomic] pressures and intense competitive landscapes.”

Ann Inc. also logged a strong stock performance, rising 4.2 percent to $32.67, despite its update on a fourth quarter marked by a “lower than anticipated” performance.

The retailer said earnings and sales for the fourth quarter will exceed those of the 2012 period, but investors focused on the company’s expectation of a higher gross margin — about 49.2 percent of sales — in the quarter as they drove the stock up.

Kay Krill, president and chief executive officer of Ann, said that “soft traffic and tepid consumer spending across the industry negatively impacted us, particularly in factory outlet centers and geographic regions that experienced extreme winter weather. Looking ahead, we have entered the first quarter with clean inventories and fresh spring product at both brands.”

Comparable sales expanded 3 percent in the quarter with the Ann Taylor division’s 1 percent decline offsetting Loft’s 6 percent gain. Within those numbers, comps declined 6 percent at Ann Taylor outlet stores and were off 4 percent at Loft’s outlets.

Gap’s unexpected increase for the quarter, which matched its January rise at 1 percent, included a 10 percent decline in January at Banana Republic, as Gap brand was up 1 percent and Old Navy up 4 percent.

The San Francisco-based sportswear giant now expects earnings per share of 65 to 66 cents for the fourth quarter, above the existing consensus estimate of 60 cents. Shares jumped 4.5 percent in after-hours trading following the release of results after gaining 3.7 percent, to $39.71, during Thursday’s bullish session.

During a conference call to discuss its forecast of 4.1 percent growth in overall retail sales, NRF officials didn’t break down expectations by classification or sector, but did say that online sales are seen expanding between 9 and 12 percent within the overall projection.

Matthew Shay, president and ceo of NRF, noted, “We’re now five, six years into the recovery from our recession. The January numbers on comp-store sales make it clear that consumers are still being very careful with the way they spend their dollars.”

Even with unemployment coming down and expected to fall to about 6.5 percent in 2014, participation in the workforce continues to decline and “jobs” and “unemployment” are “fundamentally two different things,” he observed.

Both Shay and Jack Kleinhenz, NRF’s chief economist, pointed out that political uncertainty hurt consumer confidence in 2013 but many are optimistic that machinations in Washington wouldn’t cause any damage in the new year.

“We certainly created speed bumps last year,” said Kleinhenz.

Shay said he hoped greater political certainty would lead to more robust growth, which in turn would lead to “less reliance on significant promotion and the restoration of integrity of pricing.”

Still he acknowledged that “pricing is much more transparent today” because of extensive online offerings. “Consumers have been conditioned, and that will continue going into the future.”

Craig Johnson, president of CGP, said that he expected “the weakness of January to extend into the summer,” with his 2.8 percent increase based on a second half that is stronger than the first.

Within his projections for the year is a 9.4 percent increase in e-commerce, which “represents a continued deceleration of the growth rate for online. That’s the first time since people began selling online in a major way that the forecast isn’t for double-digit growth.”

Furthermore, he noted that much of the growth in e-commerce is now going to brick-and-mortar retailers who’ve diversified. “That’s good news, except when you look at ‘comp’ numbers that are blended to include e-commerce, it suggests that many of the store-only figures are negative.”

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