A FEW STAR PERFORMERS DO LITTLE TO BRIGHTEN A DISMAL DECEMBER
Byline: Jennifer L. Brady
NEW YORK — With few exceptions — Sears, Tiffany’s and The Gap among them — December’s poor retail results are triggering further reductions on earnings estimates for the fourth quarter and year.
Women’s apparel departments were particularly hurt by a lack of shopping — and five snow days in the North at critical times certainly didn’t help.
The worst results reported Thursday were from specialty chains. Ann Taylor’s same-store
sales dropped 13.8 percent; Talbots same-store sales declined 7.7 percent, and The Limited’s fell 5 percent.
Another disappointment was Dayton Hudson Corp., where comp-store sales rose 3 percent on the strength of a 5.3 percent gain at Target. However, DH department store sales dropped 1.7 percent and the Mervyn’s division was down 1.4 percent. The company estimated earnings for the fourth quarter would be about $3 against $3.62 a year ago. DH stock fell 3/4 to 76 3/4 on the New York Stock Exchange Thursday.
On the festive side: Sears Roebuck reported same-store sales climbed 6.8 percent, Gap racked up a surprising 6 percent same-store sales gain, and Kohl’s Corp. rose 5.3 percent. Tiffany’s, riding the resurgence in luxury goods business, said its U.S. stores from Nov. 1 to Dec. 31 were ahead 13 percent.
At the big discounters, Kmart’s discount stores moved ahead 5.2 percent while Wal-Mart Stores comp-store sales rose only 1.1 percent, after a 3.8 percent decline at the Sam’s Club division.
Sears chairman and chief executive Arthur C. Martinez said despite the storm in the East on the last week before Christmas, the company posted its first $1 billion sales week. “This was also the biggest apparel month in the history of Sears, especially in women’s apparel where we had significant double-digit increases over 1994,” Martinez said in a statement.
Sears cited robust sales of twin sweater sets, holiday sweaters, intimate apparel, flannel sleepwear, fine jewelry, small leather goods, denim jeans, vests and overalls.
NatWest Securities’ index for same-store sales was up 1.8 percent, close to its estimated 1.5 percent. “The problem in December was generally pricing,” said Robert Buchanan, NatWest analyst, adding that retailers had to mark down heavily to get the sales. He lowered his fourth quarter estimate on Dayton Hudson by 35 cents to $3.02 a share.
“I see very little upswing in the beginning of the year,” said Walter Loeb of Loeb Associates. Massive layoffs and the partial shutdown of the federal government will tighten spending, he noted.
Through big post-Christmas promotions, Loeb said retailers recovered some sales lost due to winter storms before Christmas, but “gave it away” at lower margins.
Ann Taylor chairman Sally Frame Kasaks said that markdowns were in line with expectations, “though we accelerated the timing of some markdowns to be competitive in a very promotional environment.”
She added that December sales were up against a very tough comparison last year. The company expects inventories to be clean going into the spring.
Jay Meltzer, analyst at Johnson Redbook, called Ann Taylor’s decline “terrible, but on plan.” Ann Taylor stock rose 1/8 to 11 1/8.
According to Buchanan, inventories, particularly at J.C. Penney and May Department Stores currently look “OK,” but demand will probably remain weak. Penney’s and May Co. exercised restraint going into the holiday, he said.
On the upside, Buchanan raised his fourth-quarter estimate for the Gap from 4 cents to 94 cents. In the year-ago quarter Gap earned 82 cents. Gap’s strength, he said, stemmed from 12 percent same-store gains at Banana Republic and Gap Kids.
Meltzer cited the Gap as “a very favorable surprise, but that was the exception.” Gap stock rose 2 3/8 to 47 5/8 on the NYSE.
Talbots stock fell 2 1/8, closing at 26 3/8. After registering double-digit sales gains in December for the last three years, Talbots pointed to “continued weakness” in sportswear and ready-to-wear categories for this month’s dismal report.
Maura Hunter Byrne, analyst at J.P. Morgan Securities, noted Talbots’ sales were worse than she anticipated, but added that the company plans to lower expenses to reach its earnings estimate of 36 to 37 cents a share for the fourth quarter.
She added that unlike other specialty retailers, Talbots did not change its promotional calendar in the middle of the month, possibly hurting sales. Kmart said that December sales met expectations and reflect additional media support and planned promotions. Floyd Hall, chairman and ceo, said holiday sales increases were led by toys and domestics, while women’s apparel was “softer than anticipated.”
Federated Department Stores same-store sales inched up 1.3 percent, excluding a 6.5 percent comp sales decline at the newly acquired Broadway Stores Inc.
Allen Questrom, Federated chairman and ceo, called December sales “disappointing” but added that due to ongoing cost reductions, the company was able to offset the drag on profits. However, he noted that the “general weakness in the economy reflected in fourth-quarter retail sales poses a concern for 1996.” Top performers for holiday included women’s sportswear, suits, furs, fashion jewelry and cosmetics.
J.C. Penney Stores Co. same-store sales dropped 4.2 percent, but the company said retail and catalog inventory were well managed at about the same level as last year. A Penney spokesman highlighted strength in juniors tops and bottoms and cosmetics, but cited weakness in women’s sportswear.
Same-store sales at the department store division at May Co. were up 2.3 percent. Mercantile Stores same-store sales increased 1.7 percent and Dillard Department Stores comps rose 3 percent. The Bon-Ton Stores Inc. same-store sales were down 4.8 percent.
Carson Pirie Scott said its same-store sales rose 1.8 percent.
Reflecting higher than anticipated promotional activity, same-store sales at Neiman Marcus Group gained 6.1 percent. Neiman Marcus stores posted a high single digit, comparable-store increase, and NM direct was up in the mid-single digits. Bergdorf Goodman and Bergdorf Men’s Store same-store sales were up slightly.
According to the Limited’s monthly conference call, women’s apparel comparable sales were down 7 percent overall, hurt largely by “misses in its tops business.” Same-store sales declined 14 percent at Express, where sales had been on track until December. Comps were flat at Limited Stores, but sales of active tops and sweaters improved.
Lerner New York’s same-store sales were down 5 percent; Lane Bryant’s dropped 7 percent. Same-store sales at Henri Bendel rose 8 percent with cosmetics, fragrances and gift items pacing the store. Morgan’s Byrne cut her fourth-quarter estimate on The Limited by 7 cents to 53 cents against 67 cents pro forma. She also lowered her full year estimate to 90 cents.
At Intimate Brands, same-store sales increased 3 percent overall, but were flat at Victoria Secret stores. Christmas sales were better than expected for Victoria Secret Catalog, up 3 percent. However, the fast-moving Bath & Body Works division posted an 18 percent same-store sales gain, which was disappointing considering past gains during the year surpassed 20 percent.
Other specialty stores that posted sharp same-store sales declines were: Gymboree Corp. down 19 percent; Charming Shoppes Inc. and United Retail both nosedived 11 percent; Catherine’s Stores dropped 8.2 percent; Designs Inc. and Cato Corp. both fell 6 percent. Large-sized women’s chains United Retail and Catherine’s said that the December sales shortfall will depress the bottom line going forward. United Retail said it expects to post an operating loss for fiscal 1996, while Catherines’ fourth-quarter profits will fall below a year ago. In the quarter ended Jan. 1995, Catherines earned $44,000, or 1 cent a share. Regional discounters were knocked down again last month. Venture Stores Inc. said same-store sales sank 15.3 percent and blamed the results on the start-up of its repositioning to focus more on apparel and soft home merchandise. Hills Department Stores same-store sales fell 6.5 percent; Ames Department Stores declined 4.1 percent, and ShopKo Stores Inc., 4.2 percent. Yet Dollar General Corp. moved ahead 4.5 percent, but still lagged behind last year’s 9.7 percent gain.
Same-store sales in the off-price sector followed the dismal trend. Value City Department Stores same-store sales were down 4.7 percent, The Dress Barn Inc. decreased 4 percent, and Filene’s Basement Corp. 3 percent. Excluding Marshalls, TJX Cos.’ same-store sales dipped 1 percent.