CHAIN’S GAINS BLOOM IN MAY
Byline: Catherine Curan / With contributions from Thomas J. Ryan
NEW YORK — With discounters and specialty stores leading the charge, apparel retailers delivered their fourth straight month of robust sales gains in May, and many notched growth in the high single- to double-digit range.
The surge in comparable-store sales at discounters and specialty stores was driven, in large part, by casualwear business, while high-end shops saw strength in designer apparel and fine jewelry.
Sell-throughs of spring merchandise were lifted by warm weather in most of the country, but rain dampened sales in California, the nation’s major retailers said in reporting their May results Thursday.
Retail analysts said strong demand for apparel — a category that has been gathering momentum since February — has developed into a bona fide trend, and larger economic factors continue to augur for healthy consumer spending.
“I’m getting more and more encouraged about apparel retailing” said Peter Schaeffer, analyst at SBC Warburg Dillon Read. “May comps show continuing strength, and it’s across all categories.”
“When you sell summer clothes in May, you make a lot of money on it, because it’s either full price or first markdown,” Schaeffer pointed out. As a result, inventories will be in good shape going forward, and Schaeffer said retailers are “in a good position to have a profitable second quarter.”
Standout performances ranged across the retail spectrum, from Gap to Wal-Mart to Neiman Marcus Group to Talbots. Also racking up strong increases in the specialty store sector were Limited, Charming Shoppes and Cato.
“There’s more demand for fashion,” observed Walter Loeb of Loeb Associates Inc., retail consultants. “Consumer confidence is still strong, the stock market is strong, and unemployment figures aren’t scaring anyone,” Loeb said, adding that these conditions should boost retailers’ second-quarter profits.
According to the BT Alex Brown Same-Store 100 overview, softline sales moved ahead 4.7 percent in May, compared with an 8.6 percent gain in hardlines, which includes home-related merchandise.
By sector, Alex Brown reported comps advanced 11.3 percent at specialty apparel stores, 9.7 percent at discounters and 9 percent at warehouse clubs. Analysts at the investment bank noted that comparisons against last May were relatively easy because of cool weather a year ago.
The standout among specialty chains was Gap Inc., whose 24 percent rise marked its sixth consecutive month of double-digit sales gains at stores open at least one year, noted Warren Hashagen, chief financial officer, in a telephone interview from Hong Kong Thursday.
Citing strength across the board, Hashagen observed, “Women’s was the standout.” Bottoms, particularly khakis, were hot, especially at The Gap, which Hashagen attributed in part to the chain’s high-profile global ad campaign.
By division, sales rose in the high 20 percent range at Old Navy, the mid 20s at The Gap division, the mid teens at Banana Republic and the low double digits at Gap Kids.
Limited surprised analysts with its 9 percent comp gain, driven by better-than-expected performances at Express (surging 26 percent versus a 28 percent slump last year), Lerner New York (rising 19 percent against a 13 percent decline), and Lane Bryant (advancing 10 percent versus a flat results).
Merchandise margins improved at all three chains, and the Limited noted that knit tops, shorts, knit skirts and lingerie paced sales at Lane Bryant.
The Limited was also helped by gains at Limited Too (up 11 percent), Intimate Brands, up 3 percent, and Abercrombie & Fitch, which was included in Limited’s sales until the chain was spun off on May 14.
On the downside, Limited Stores fell below plan, with comps sagging 1 percent.
Talbots 13.4 percent gain far outstripped the 4 to 6 percent growth anticipated by Stacy Pak, analyst at CS First Boston. “Customer demand for our merchandise has been consistently strong since mid-March,” said Arnold B. Zetcher, Talbots’ president and ceo, who added that this affirms the company’s return to classic merchandise.
Healthy gains at the discounters were driven by seasonal goods, said John Pitt, analyst at LJR/Redbook Research. Spring merchandise, especially apparel, fueled comp-store gains of 11 percent at Wal-Mart Stores Inc., 7.4 percent at Target and 6.9 percent at Kmart.
At Kmart, women’s apparel was a leading contributor to the chain’s above-plan results, chairman and ceo Floyd Hall said in a statement. Children’s apparel and jewelry also did well, he reported.
Wal-Mart’s comps were ahead 11 percent company-wide — on top of 6 percent growth a year earlier, with discount stores up 11.4 percent and Sam’s Clubs up 9.6 percent. Women’s and men’s apparel turned in solid results.
Teen retailers also maintained their strong momentum. Following on the heels of American Eagle Outfitters, which reported a 46.4 percent comp gain Wednesday, were the Buckle, up 23.6 percent, Pacific Sunwear, up 11 percent, and Gadzooks, up 5.3 percent.
Gadzooks saw solid increases in young men’s wear and excellent comparisons in junior apparel excluding swimwear, which has suffered for a couple of months. Jerry Szczepanksi, chairman and ceo, said much of the junior swimwear inventory was cleared in May, aided by warmer weather and aggressive merchandising.
Department stores were the weakest sector, with low-single-digit gains at stores such as Federated Department Stores and May Department Stores, though they generally met conservative plans. Kohl’s continued as the standout in the group, with comps surging 17.4 percent.
Schaeffer said the department-stores group may be suffering from its de-emphasis on home goods, which are hot, and from the homogenization of assortments wrought by consolidation and centralized buying.
At the high end, broad-based increases contributed to the 9.6 percent increase at Neiman Marcus Group. Neiman Marcus stores had double-digit gains, according to a spokesman, while Bergdorf Goodman had mid-single-digit growth and Bergdorf Goodman Men and NM Direct each grew in the high-single digits.
W. Mullins, executive vice president of the Neiman Marcus chain, told WWD that Neiman Marcus’s business was driven by regular-priced selling, with good results from Mother’s Day and a customer loyalty program.
Jewelry, both semiprecious and precious, was probably the strongest category for the company in May, and fashion accessories such as hair goods and sunglasses also performed well, Mullins reported.
In women’s, designer, couture and eveningwear were standouts for Neiman’s, as was bridal. Special sizes were the top performers in bridge, driven by petites.
At Saks, fine jewelry, career and casual bridge apparel were among the key categories that fueled the company’s 3.7 percent increase in May, according to a spokeswoman.
In a statement, Philip B. Miller, chairman and chief executive officer, said Saks’s full-line, resort and Main Street stores had a 1.7 percent comp gain, following a 22 percent gain last month. Comps were up in the low single digits at Off Fifth, and the high double digits at Folio, aided by the shift of a catalog from April to May.
Among department stores, Proffitt’s turned in one of the strongest performances, with comps climbing 6 percent in May.
The increase was fed by sales of women’s better sportswear, special sizes, moderate sportswear, intimate apparel and men’s sportswear.
Strong sales of women’s apparel contributed to a 3.6 percent increase at May Co., but overall results were hampered by weakness in California.
And although Federated’s 1.8 percent growth hit the company’s target of 1 to 2 percent, Kimberly Walin, analyst at Furman Selz, said: “Gap is probably pulling a little bit from them in terms of casualwear.”
Same-store sales expanded 6.1 percent at Dayton Hudson last month, despite a 2.1 percent dip at Mervyn’s, as the department store business rose 8.6 percent, along with Target’s 7.4 percent increase.
The results at Target and the department stores beat plan, but Mervyn’s sales were below expectations, Bob Ulrich, DH chairman and ceo, said in a statement.
At Bon-Ton Stores, intimate apparel, junior apparel, shoes, women’s sportswear and men’s contributed to a 6 percent increase, while better men’s and women’s sportswear drove a 10.3 percent increase at Elder-Beerman.
Meanwhile, at Sears, Roebuck & Co., Arthur C. Martinez, chairman and chief executive, said in a statement that hardgoods sales led the way to a 5.4 percent increase at its U.S. department stores. Best-selling categories included intimate apparel, cosmetics and fragrance.
Career and casual knits, casual bottoms including misses’ Levi’s and updated careerwear from lines such as First Issue by Liz Claiborne also rang the registers, according to a Sears spokeswoman.
Misses’ casual sportswear spurred the women’s area at J.C. Penney, while accessories were led by jewelry. Shorts and swimwear were strong in men’s, women’s and children’s. However, Penney’s 0.4 percent comp gain at the department stores did not meet its plan, analysts said.
Gottschalks, the West Coast regional chain, cited the cool, rainy California weather in reporting a 2.5 percent comp-store decline. Joe Levy, chairman and ceo, said in a statement that the unseasonable weather made it tough to sell items such as swimwear, tops and activewear, and the weakness could not be made up by strong demand for home goods.
Among smaller women’s specialty chains, winners included Braun’s Fashions Corp., up 18 percent on a comp-basis; United Retail Group, advancing 27 percent, and Catherines Stores Corp., adding 12.3 percent.
On the downside, Paul Harris’s comps fell 9 percent, and Eddie Bauer was off 5 percent. Big ftopd were reported by Designs Inc., down 25 percent, and Gantos, down 18 percent, because of weakness in day dresses.