NEW YORK — There’s no retail slowdown just yet — but it’s close.
Despite hurricanes, warmer-than-normal temperatures and record-high fuel prices, consumers kept shopping in September, drawn in by early fall promotions. As a result, retailers’ same-store sales were surprisingly buoyant while the luxury juggernaut continued.
According to the International Council of Shopping Centers, aggregate same-store sales among the 71 retailers it tracks rose 4 percent last month, ahead of its estimate for a 3 percent gain. But Michael Niemira, chief economist and director of research at the ICSC, said September’s results were deceiving because they include gasoline sales at wholesale clubs, which were favorably impacted by a nearly 50 percent increase in gas prices.
Among the 50 retailers tracked by WWD, 27 posted positive September same-store sales and 21 had negative results, the closest positive-negative ratio since November 2004. One retailer, TJX Cos., had flat same-store sales compared with the prior year. Results for May Department Stores were unavailable because September was the first month the company was officially merged with Federated Department Stores, and Federated did not break out May’s comps.
Specialty retailers, as tracked by WWD, posted the highest aggregate increase in the month with a 5 percent rise, while the department store group narrowly beat mass merchants with respective 1.4 percent and 1 percent comp increases.
Meanwhile, the luxury segment kept a respectable pace with the Neiman Marcus Group and Nordstrom Inc. posting same-store sales gains of 9.6 percent and 4.1 percent, respectively, while Saks Fifth Avenue Enterprises reported a 2 percent increase.
At Nordstrom, sales were strongest in accessories and junior women’s apparel, while cosmetics, men’s apparel and women’s designer apparel also performed well.
In the specialty channel, comps were mixed, with Abercrombie & Fitch Co. reporting a 21 percent jump in comps and Zumiez Inc. posting a 10.1 percent gain. Conversely, Aéropostale Inc. said comps dropped 4.2 percent, while all three of Gap Inc.’s divisions had negative comps. In their fall and back-to-school merchandise sets, retailers in the specialty channel had been pushing jeans, denim skirts, cardigans, cashmere and shrunken blazers.
At the mass retailers, sales of consumables and gasoline benefited discount retailers such as Wal-Mart and Target, which reported same-store sales gains of 2.6 and 5.6 percent, respectively.
Overall, results were not near the doom-and-gloom scenario some analysts had expected. Still, September sales could have been better.
“There’s so much noise out there right now that to some extent it’s probably had an impact on the consumer psychology of buying. I don’t think we’ve seen in the last couple of years this many distractions,” said Pat Conroy, vice chairman and national managing principal of Deloitte & Touche USA LLP’s consumer business practice, referring to macro factors such as high gas prices, hotter-than-normal September weather and the impact of major hurricanes.
Chris Donnelly, a partner in Accenture Ltd.’s retail practice, thought the month’s comps, or sales at stores open at least a year, were solid, especially considering it was what he called a “tumultuous” month due to the hurricanes and increasing gas prices.
“Going into the month and over the course of the month there was a lot of uncertainty — the hurricanes, gas prices and the like — and you wouldn’t have been surprised if it was kind of a slower month. But if you look at it across the board, it was a solid month,” he said.
Although many retailers cited gas prices, the hurricanes and warm weather as negatively impacting back-to-school and early fall sales, only a handful — Talbots, Aéropostale, Stage Stores, Mothers Work and TJX Cos. — actually reduced third-quarter earnings estimates as a result. The majority maintained prior forecasts, while some even lifted projections.
Goody’s Family Clothing, based in Knoxville, Tenn., which announced plans Thursday to be acquired by Sun Capital Partners, said it expects to report a loss of 2 cents a share in the third quarter due to Hurricanes Katrina, Rita and Ophelia and the month’s warm weather, which caused the company to be “more promotional than planned.” Six Goody’s stores still remain closed because of the hurricanes.
Most retailers included the stores they closed due to the hurricanes in their comp-store sale calculations while some, such as Limited Brands, Cato Corp. and Claire’s Stores, did not.
Wal-Mart said sales were strongest in the South and Southeast regions of the U.S. during September. Food sales were once again stronger than general merchandise, but the company said on a recorded call that sales increased for items such as cleaning supplies, basic apparel, hardware, canned foods and water. Wal-Mart also said the total impact of the hurricanes will reduce third-quarter earnings by a penny a share, yet maintained its third-quarter earnings guidance for 55 to 59 cents. Analysts are expecting a profit of 57 cents in the quarter.
Similarly, Target said in a recorded call that women’s apparel, perishables and consumables and household products as well as jewelry and accessories were some of the strong sellers in the month.
But Gap Inc. saw continued sales weakness, reporting a 3 percent decline in comps in its domestic Gap division, while Banana Republic and Old Navy each posted comps that fell 7 percent due to weak customer response to merchandise.
Sabrina Simmons, senior vice president of treasury and investor relations, said on a recorded call that the Gap division started its annual fall sale three days early and that overall men’s sales outpaced women’s. “In women’s, active tops performed well, while in men’s, casual blazers and knits were strong,” she said.
Finally, aside from posting flat comps, off-price retailer TJX said Thursday that Carol Meyrowitz has been named president of the company effective Oct. 17. Since January she has served in an advisory role in consulting for TJX and for private equity firm Berkshire Partners LLC. Meyrowitz previously served as senior executive vice president of TJX and president of its Marmaxx Group. Ben Cammarata, acting president and chief executive officer, will still serve as acting ceo until a permanent one is named. Edmond English resigned as president, ceo and director of TJX less than a month ago.
TJX also said it plans to close its TJ Maxx and HomeGoods Web sites due to underperformance. “With sales that have been below our plan and pretax operating losses that have increased over the past year, our exiting this business will allow us to avoid operating losses on a go-forward basis and, importantly, also allow us to narrow our focus and concentrate our energies on other areas,” Sherry Lang, vice president of investor and public relations, said on a recorded call.
TJX now expects to earn 36 to 38 cents a share in the third quarter, down from a prior estimate of 43 to 45 cents.
With roughly one more month left in the third quarter, retailers could see the macroenvironment settle down and a subsequent pickup in demand in October, Deloitte & Touche’s Conroy predicted, which is probably why there weren’t more companies lowering earning estimates on Thursday. Consumers “have been watching what’s going on and they are going to have to [eventually] buy fall clothes,” he said. “There probably is a bubble out there that’s waiting to come to fruition.”