COOL WEATHER SPURS MONTHLY SALES AT SPECIALTY STORES AND DISCOUNTERS
Byline: Melanie Kletter / With contributions from Thomas Cunningham
NEW YORK — Cool weather in early August spurred fall apparel business at the specialty stores and discounters and fueled another month of solid sales gains for both sectors, but the sales pace slowed somewhat for many department stores.
Comparable-store sales advanced by an average of 6.6 percent in August, according to the Deutsche Banc Alex.Brown index of 100 stores, paced by discounters, who led the pack with a 7.6 percent gain.
They were followed by specialty stores, up by an average of 6.6 percent, and traditional department stores, up 3.6 percent, while comps at moderate-price chains, such as Sears and Penney’s, eased 1.1 percent.
A number of smaller chains, such as Gottschalks, Hot Topic, and The Buckle, said that strong back-to-school business pushed up comps in August, while two retail giants, Kmart and J.C. Penney, reported b-t-s sales were sluggish.
During August, retailers traditionally offer season-ending promotions on summer goods while launching back-to-school merchandise and early fall fashion lines. For the most part, fresh fashions at full prices drove sales, with robust demand for fleece, vests and nylon pants, among other items, and strong performances by the accessories and cosmetics categories.
Leaders among the retailers reporting monthly sales Thursday included Talbots, where comps surged 18.1 percent in August, pacing the month for most in the specialty sector. That segment also saw double-digit gains at Limited, Ann Taylor, Eddie Bauer and American Eagle Outfitters.
Retailers offering broader assortments also racked up healthy comps, as Wal-Mart Stores, Kohl’s, Dillard and Neiman Marcus all posted increases in the high single digits.
Arnold B. Zetcher, president and chief executive officer of Talbots, said in a statement, “Our trends during the month were exceptional. Markdown sales of transitional merchandise and regular-price selling of our early fall merchandise were outstanding in all regions. These positive trends…reflect our customer’s continuing enthusiasm for our updated classic fashion.”
Maura Hunter Byrne, at Salomon Smith Barney, noted that the introduction of wear-now merchandise has benefited Ann Taylor and other specialty chains.
Comps at Gap Inc. jumped 8 percent, led by double-digit growth at Old Navy and Banana Republic; however, sales at the core Gap stores were down for the second month in a row.
At Gap Inc. fashion merchandise was very strong and outperformed some basic categories, such as bottoms, said Warren Hashagen, senior vice president, international, department of finance and business development. “We didn’t have enough fashion items,” he admitted, adding that advertised items like vests sold well at both Gap and Old Navy.
Old Navy’s comps were up in the high teens, followed by Banana Republic in the mid-teens, according to Hashagen, while comps at Gap stores were down in the mid-single digits, and GapKids had flat sales.
J. Patrick Spainhour, chairman of Ann Taylor, reported that transitional fall apparel continued to drive sales. “All key product categories contributed to our success, most notably suits, sweaters, relaxed separates, casual and shoes,” Spainhour said in a statement.
Among smaller specialty chain winners were American Eagle Outfitters, which reported a 24 percent comp surge, and Chico’s FAS, the fast-growing women’s specialty retailer, where comps surged 19.9 percent. Braun’s Fashions Corp. banged out a 16 comp gain.
Meanwhile, below-plan performances were turned in by Sears Roebuck, whose comps were nearly flat, rising 0.1 percent, and Saks Inc., up 1 percent. Sears also said its top merchant has left the company, and that its earnings would come in far lower than expected due to weak sales. (See related story, page 4.)
“What we are seeing is more of what we have seen in the past year: Specialty stores are taking market share from department stores,” said Dorothy S. Lakner, analyst at CIBC World Markets. “Their merchandise is more in line with what customers want, and their service is certainly much better.”
“Inventories appear to be quite clean, which has positive implications for margins, and the consumer is still spending in the concepts that have the right merchandise,” said Joe Grillo, analyst at Deutsche Banc Alex.Brown. “We continue to believe that those retailers that have the right merchandise, in the right environment, will continue to gain market share.”
Thomas H. Tashjian, analyst at Banc of America Securities, said Labor Day sales will give a clearer picture of whether consumer spending is slowing. He noted, however, that some leading economic indicators such as job growth and gross domestic product have weakened somewhat. “August was a mundane month; there was nothing shocking,” Tashjian said. “What was interesting is that when cooler weather arrived, we saw a nice reaction with strong demand, and then demand petered out later in the month. This often happens when you have a later Labor Day.”
At Neiman Marcus stores, same-store sales ran up 10.9 percent, driven by strength across the board, said a company spokeswoman. Bergdorf Goodman was flat against the year-ago period because of less clearance activity this year.
More moderate performances were turned in by Saks Inc., Federated Department Stores, and May Department Stores, all of which reported low- single-digit gains.
“It is important to remember we shifted the start of the August home sale event into July in several of our divisions,” said James M. Zimmerman, Federated’s chairman and ceo. “Excluding the impact of that switch, August sales were consistent with year-to-date trends.” Zimmerman pointed out that because of that shift, it is more useful to look at comp-store sales performance for the combined July-August period, which were up 3.7 percent.
Saks said its leading categories last month were cosmetics, women’s special sizes, footwear, fashion accessories and decorative home goods. Saks saw softer sales of dresses and women’s moderate-priced sportswear.
Same-store sales at Dayton Hudson expanded 4.9 percent, fed by a 7.6 percent gain at Target, but both Mervyn’s and DH’s department store division saw sales slip below plan. Another laggard was J.C. Penney, which saw its comps slide 3.5 percent, due primarily to sluggish sales of national brands of basic jeans. However, Penney’s said women’s apparel and accessories performed well.
In the robust specialty store segment, comps at Limited Inc. were led by the Limited Stores division with an 11 percent gain. Sales at Limited stores were lifted by a pre-season sale, and were also sparked by strong demand for boot cut jeans and cotton T-shirts, Limited executives said on a conference call Thursday.
Among Limited’s other divisions, Express posted a 10 percent comp surge, benefiting from hot demand for jeans, especially flares, embroidered styles, and party dresses. Comps improved 9 percent at Lerner New York, advanced 8 percent at Lane Bryant, and added 8 percent at Structure.
All of Limited’s divisions topped sales plans except Lane Bryant, which met its plan.
Intimate Brands Inc., the parent of Victoria’s Secret and Bath & Body Works, which is 83 percent owned by Limited Inc., on Wednesday reported a comp surge of 17 percent.
In the discount sector, Wal-Mart’s comps grew 8.7 percent, sparked by a 9.1 percent improvement at the discount division, which includes the Wal-Mart supercenters, and a 7.4 percent gain at the Sam’s Club warehouse outlets. A company spokesman said women’s apparel, hosiery, and fashion accessories were among the bestsellers.
Kmart’s comps advanced 3.4 percent, held back by disappointing b-t-s business.
In a statement, Floyd Hall, Kmart’s president and ceo, said, “Despite sluggish sales in back-to-school supplies, categories showing particular strength for August included children’s and men’s apparel, and home-related areas such as electronics, housewares, and decor, as well as jewelry, fashion accessories, consumables and pharmaceuticals.” Among regional discounters, same-store sales at Ames improved 4.2 percent. A fast-paced back-to-school business was led by children’s apparel, and women’s apparel also sold well, Joseph E. Ettore, president and chief executive, said in a state
ment. August results were helped by strong sales through July, which left less merchandise to be marked down for clearance, according to Ettore. “Our comp sales growth rate year-to-date is exceptional and should allow us to maintain the momentum through the yearend,” he added.
Regional discounters generally performed well in August, as Bradlees turned in a double-digit increase, and ShopKo chalked up a mid-single-digit increase.
Goody’s Family Clothing reported comparable sales declined 9.3 percent. Goody’s has been “behind the curve in identifying some fashion trends,” said Robert M. Goodfriend, Goody’s chairman and ceo, in a statement. “The retailer has also had trouble in balancing its strategies of margin expansion and inventory reduction,” he noted.
In the off-price sector, same store sales results were mixed, with Ross Stores and TJX turning in single digit gains, while Dress Barn reported a slight decline for the month.