SEPT. WEATHER CLOUDS RETAIL SALES

Byline: Diane E. Picard

NEW YORK — Aside from a bounce in high-end designer collections and juniors, September sales at stores across the country were widely disappointing, yet some retailers and analysts remained upbeat about the rest of the year.
On Thursday, many stores reported small sales gains, or volumes that fell under year-ago figures. They blamed the below-plan results on unseasonably warm weather discouraging consumers from shopping for fall fashions, while hard goods held up at several chains.
James M. Zimmerman, chairman and chief executive officer of Federated Department Stores, said in a statement that the company was “somewhat disappointed” with its September results. But, he added, “We believe we are still on track for a solid performance on the year.”
Robert F. Buchanan, analyst with NatWest Securities, said September’s weak sales were an anomaly, and October sales should be in line with expectations.
“This month it’s been so warm that people weren’t thinking about fall merchandise,” he said. “But the underlying fundamentals are strong. There has been growth in disposable income, and consumer confidence is high.”
Looking to the holiday season, Buchanan said he expected same-store sales to be on average ahead 5-6 percent, “assuming the weather cools off in time for Thanksgiving.”
“The results of September serve as a starting gun for the fourth quarter,” said Isaac Lagnado, president of Tactical Retail Solutions. He noted that stores typically come in with heavy inventories, but if the month goes poorly, “they might postpone receipts and cancel some orders” for the fourth quarter. “It’s a big enough month,” he said.
Still, Lagnado added, “When all is said and done, it’s going to be a late Christmas but generally a pretty good one. There’s a pentup demand on apparel, and there has been a lot of freshness in silhouettes and fabrications.
As reported, Wall Street is anticipating a strong Christmas for retailers.
Yet, with September numbers out, a few analysts have become more cautious in their outlook. Peter Schaeffer at SBC Warburg Dillon Read, for one, said the poor September numbers indicate the retail momentum from some months earlier in the year may be over. “For most consumers, closets are full, and it’s the high end customer that will continue to buy,” he said.
Last month, they did.
The Neiman Marcus Group posted a 5.6 percent same-store gain, while Saks Fifth Avenue kept close to the pace with a 5 percent same-store gain.
Saks chairman and ceo Philip B. Miller said the firm’s core same-store sales gains were “driven by solid increases in our Saks First double points and continued strong demand in designer apparel, fine jewelry, and men’s apparel.” He added, “However, results were somewhat offset by a mid-single digit decline in same-store sales at Off 5th,” the clearance division.
The Neiman Marcus Group also benefited by strong sales of designer merchandise. A spokesman noted that Neiman Marcus stores reported comp gains in the high single digits, and Bergdorf Goodman’s same-store sales were up in double digits. These gains were partially offset by a double-digit decline in mail order sales at NM Direct.
Department stores, a more moderate priced sector, reported disappointing September comps.
Federated Department Stores reported a below-plan gain of 2.7 percent. May Department Stores’ same-store sales were up only 0.5 percent. Sears, Roebuck was up 1.5 percent, while J.C. Penney fell 7.3 percent, Mercantile Stores was up 1.9 percent and Dillard’s came in flat.
Among discounters, Kmart characterized its 3.1 percent same-store gain as “low” and cited weakness in men’s and women’s apparel due to warm weather and low consumer demand. Apparel sales through the first week of October have been below expectations, the chain said.
Ann Taylor suffered a 13.9 percent decline, and Talbots dropped 4.7 percent.
Ann Taylor said early fall merchandise had a weak performance, though the company saw strength in suits and shoes. Some analysts contend that Ann Taylor has not yet found a consistent merchandising formula. Based on August and September sales, Ann Taylor said it does not expect to meet its original sales plan for the third quarter, though gross margins are still expected to exceed the year ago.
At Talbots “although sales during the first two weeks of September were above our expectations, traffic in the latter part of the month dropped off abruptly and unexpectedly,” Arnold B. Zetcher, president and ceo, said. “Our new advertising and marketing campaign, which was launched in September and designed to build store traffic will take more time to settle in.”
The Limited said same-store sales were down 7 percent. In a conference call, the company said margins at Limited Stores were flat, and the chain’s “non-promotional brand view” was the cause of the decline. Express reported a 19 percent decline and the Limited Stores reported a 24 percent drop in same-store sales.
Lerner’s comps were off 7 percent, with clearly underperforming ready-to-wear and outwear. Lane-Bryant comps slipped 4 percent hurt by poor sales of sweaters during a period of warm weather.
Gap reported a same-store sales gain of 6 percent. And Schaeffer added that The Gap stores, Banana Republic and Gaps Kids all had single-digit gains. Old Navy same-store sales were down in the mid-single digits, but Schaeffer noted that Old Navy faced tough year-ago comparisons.
At Sears, Roebuck, “Solid increases in appliances and electronics were offset by relatively flat apparel sales that were hurt by unseasonably warm weather over much of the country,” Arthur C. Martinez, chairman and chief executive officer, said in a statement. “Within apparel, women’s ready-to-wear and cosmetics continued to perform well, but children’s and men’s categories were down.”
Dayton Hudson Corp. comps increased 3.1 percent, with Target reporting a 5.3 percent gain, while Mervyn’s was off 2.4 percent and the department store division slipped 2.6 percent.
“September sales at Target and the department stores were essentially on plan, while sales at Mervyn’s were below expectations,” Bob Ulrich, chairman and chief executive officer, said in a statement.
Strong sellers at Target included electronics, toys and consumables. Mervyn’s top sellers included career apparel, special sizes, jewelry and casual sportswear. At the department stores, dresses, furniture and bridge sportswear performed well.
DH also noted that during the third quarter it will have a pre-tax gain of $32 million, or 8 cents a share, after taxes related to the sale of credit card receivables.
Carson Pirie Scott same-store sales rose 1 percent. Stanton J. Bluestone, chairman and chief executive noted that unseasonably warm weather reduced customer traffic in nearly all stores.
At J.C. Penney, a spokesman noted that women’s jewelry, dresses, Jacqueline Ferrar and sweaters did well. Outerwear sales were disappointing, he noted, due to warm weather.
Gottschalks’ same-store sales edged ahead 0.2 percent. The company said, comparable-store sales were virtually flat during the month due to some unseasonably warm weather and less clearance merchandise this year than last.
Proffitt’s Inc. said that excluding its Parisian division, same-store sales were ahead 1 percent. By division, the Proffitt’s stores comps were ahead 8 percent; Younkers, up 2 percent; Herberger’s and Parisian 1 percent each. McRae’s comps dipped 2 percent.

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