SPRING NOT EXPECTED TO BRING MUCH RELIEF TO STRUGGLING STORES
Byline: David Moin — with contributions from Mark Tosh and Sharon Edelson, New York; Rusty Williamson, Dallas, and Georgia Lee, Atlanta.
NEW YORK — As the post-Christmas markdown mania winds down, it’s time for stores to make the transition into fresh spring fashions, but the new goods aren’t likely to bring much good news, at least in the near future.
NatWest Securities analyst Robert Buchanan said American consumers are still dragging their feet, while Macy’s East ceo Hal Kahn believes, “There’s nothing in the wind that says consumer confidence is going to change, and that’s really across a lot of businesses, from Wal-Mart to Penney’s, all the way up the line.”
The industry’s lack of optimism for the first half of 1996 will be underscored Thursday, when major retailers report December sales. Department stores are expected to be down minus 1 to ahead 2 percent for the month, and many specialty stores, including Ann Taylor, are expected to be deep into negative territory. Stores continue to be in a clearance mode until the beginning of February.
Jay Meltzer, retail analyst at Johnson Redbook, said, “For Ann Taylor, we’ve moved our numbers down to a slightly better than break-even for the year and for the current quarter on the earnings side. That would indicate disappointing sales.”
The NatWest retail same-store sales index, a weighted average of 20 major U.S. retailers, rose 1.5 percent in December, compared with a 4.9 percent gain in the year-ago period. The soft goods index was up 0.3 percent for the month, while hard goods jumped 2.3 percent.
“Although snow and other bad weather contributed somewhat to December’s disappointment, weather wasn’t the big problem,” Buchanan said in a report on December sales. “The big problem was that, simply put, American consumers are in no rush to buy these days.”
According to NatWest estimates, Kohl’s Corp. and Kmart Corp.’s discount stores turned in the strongest performances among department stores and general merchandise retailers, with same-store sales gains of 5 percent and between 5 and 6 percent, respectively. Sears, according to other analysts, also is expected to report a 5 to 6 percent same-store gain.
Among the other NatWest estimated increases: Neiman Marcus Group, 3 percent; Target, 3 percent; Dillard Department Stores, 2 percent; May Department Stores, 2 percent; The Gap, 1 to 2 percent, and Wal-Mart, 0 to 1 percent. NatWest estimated Federated Department Stores would report flat sales for December and Nordstrom, flat to down 1 percent.
Among the retailers NatWest expects to post negative same-store sales are Dayton Hudson department stores, down 3 percent, and DH’s Mervyn’s division, off 2 percent.
“For the most part, those retailers that got the sales in December did so at the expense of margins and overall profitability,” Buchanan noted.
J.C. Penney said Tuesday that December sales were down 1 to 3 percent overall and women’s sales down about 5 to 9 percent, though last week accessories, cosmetics, denim and juniors were strong.
Snow fell on major promotional days at Macy’s East, costing the chain one or two points for December, Kahn said, but he added, “We expected last week to be outstanding and we accomplished it. We felt the opportunities were the week before Thanksgiving and the week after Christmas.”
Asked if last week’s sales surge was due to heavy promoting, Kahn responded, “We didn’t add any promotions for the month. My feeling is that last week was particularly strong because a lot of customers waited until after Christmas to shop. We were not surprised by December, other than on snow days. The trend was no different from back-to-school. Stocks are in line.”
Jeffrey Sherman, president of Bloomingdale’s, said the store was “noticeably ahead of plan” last week and will beat plan for the month. “A lot of it was driven by stores outside of the East, particularly Florida, where it was cold and people shopped instead of going to the beach,” he said. Bloomingdale’s Washington area stores were also strong despite the government’s partial shutdown, he added.
Generally, aggressive markdowns and sales helped retailers last week, observed Linda Kristiansen, retail analyst at Shroder Wertheim. “There was plenty to clear,” she said. “I’m revising my expectations upward for the month by a point or two. Last week was a very strong week, as expected, because you picked up a Sunday in exchange for a Monday. Also, this past Saturday was up against New Year’s Eve a year ago.”
Kristiansen expects most retailers to log in with double-digit increases for last week, above plans.
Not everybody will, though.
Hills Stores Co., a 164-unit discounter based in Canton, Mass., did not make its plan for a 1 to 1.5 percent same-store sales increase in December and is “cautiously optimistic at best” for January, according to Jim Feldt, executive vice president and general merchandise manager.
“We were disappointed in how December finished,” he said. “The [weather] really ended up putting a damper on sales basically the whole month.” He said the key for the spring is to reduce clearance markdowns by keeping tighter control of inventory.
“The trend continues to be that the apparel side of the business seems to be taking the brunt of the sluggishness, while hardlines continue to fare better,” he said. “But as you start to skew your business towards lower-margin goods it creates a little bit of a problem.”
“If we can manage inventory flow better than we have in the past, obviously the offshoot is fewer markdowns, more timely markdowns and fresher inventory,” he said. “Newness is what sells.”
At Kmart, sales since the Wednesday after Christmas have been “relatively solid,” according to a spokesman.
“I don’t see things changing dramatically from the kind of environment that we’ve seen from the beginning of the holiday season,” the spokesman said.
“Very few companies escaped this Niagara of negative attitude on the part of the shopping public,” said Kurt Barnard, president of Barnard’s Retail Marketing Report. The winners, according to Barnard, include Sears, Bed, Bath & Beyond, which he expects will have a 10 percent comp-store sales gain, and Best Buy, a computer and electronics retailer.
“Outside of that, it was the most dispirited Christmas buying season in memory,” Barnard said.
“We are on plan or slightly over plan,” said Carey Watson, senior vice president of marketing of Burdines. “The fifth week of December was just like the rest of December, basically right on plan. The surge for us came about three days before Christmas and then continued after Christmas. I think we had a fairly aggressive plan, and I feel good that we made plan. It looks like January is off to a good start.”
Saks Fifth Avenue had a strong finish and was up 12 percent for December, on a comp-store basis, according to Philip Miller, chairman and ceo. He believes that more people were on vacation in the Christmas to New Year’s period, giving them time to shop. “The crowds in our stores were as dense as pre-Christmas. Certainly, the whole feeling was that the city was on holiday, and there were a lot of tourists in town.”
“The other issue was, we did not do a lot of price promoting pre-Christmas. We waited to take significant markdowns after Christmas,” and they were more heavily advertised than a year ago.
With New York affected by snow, Saks’ gains were larger in Florida, California, Atlanta, and Tysons Corner, Va., Miller said.
“We are going to have good spring,” in part because the strong stock market. “There’s a feeling of prosperity among a lot of our best customers,” Miller said. “Inflation, joblessness and consumer debt are not so much factors for our customers.”
In terms of promoting, “Saks this week will be quiet, and we’ll run end of winter sale in the middle of January, and a final consolidation sale in the middle of February.”
Joe Levy, chairman and ceo of Gottschalks, said he was pleased with December results, even though same-store sales declined.