Byline: Jennifer L. Brady

NEW YORK — There was some momentum early on, but retail sales in November skidded to a crawl, producing a disappointing month overall and further evidence that this will be a dreary Christmas season.
Specialty chains were hit the hardest again this month, particularly Ann Taylor Stores Corp., where same-store sales plummeted 15.9 percent. The Gap Inc., Talbots and The Limited Inc. also fared poorly. The retail sector has lagged behind the rest of the industry since spring. Bob Ulrich, chairman and chief executive officer of Dayton Hudson Corp., issued a somber statement, noting that since Mervyn’s and the department store divisions were slightly below plan, “We are concerned about our level of profitability in the fourth quarter and we remain cautious about the holiday retail season overall.”
Same-store sales at Federated Department Stores Inc. increased 2.4 percent, excluding the ailing Broadway Stores acquired in October. Allen Questrom, Federated’s chairman and ceo, called the gain “mildly disappointing,” but added in a statement that it should not be viewed as a forecast for the season. “Experience in recent years has shown that consumers are shopping later in the holiday season and the final selling days often are the most telling,” he said. Broadway’s same-store sales were down 15.9 percent.
There were a few bright spots, such as Mercantile Stores Co., where same-store sales grew 6.2 percent. Sears Roebuck & Co.’s domestic same-store sales grew 5.1 percent. Same-store sales at Kohl’s Corp. climbed 10.5 percent, and at Gymboree Corp. leaped 46 percent.
Kmart reported a surprising same-store sales gain of 5.6 percent, but analysts questioned how much of that was profitable business because promotions were heavy. Across the industry, colder weather and aggressive promotions did help sales of sweaters and outerwear, though not enough to get retailers in a groove. Now executives are pinning their hopes on last-minute Christmas shopping, and perhaps post-Christmas clearances, to pull out the quarter. But most had expected a weak season.
A Sears spokeswoman cited strength in intimate apparel, particularly Van Raalte bras and panties, terry cloth robes, textured sweaters, fine gold jewelry, social occasion dresses and outerwear. “Our November sales were boosted by the best Thanksgiving weekend in our history,” said Arthur Martinez, Sears chairman and ceo in a statement.
Mercantile attributed its gain to very good sales the day after Thanksgiving, but added that sales slowed over the weekend. A spokesman noted sales for virtually all merchandise divisions were “higher than plan,” except for women’s dresses and shoes. “Retailers had to drop prices to get the customer excited,” said Robert Buchanan, analyst at NatWest Securities. He noted several chains such as Gap, J.C. Penney Co. and Dayton Hudson are reporting significant pressures on gross margins.
He added that since retailers were so promotional in November, they will need to mark down even more in December.
According to the NatWest retail index, same-store sales rose “an about-as-expected 2.8 percent,” with hard goods outperforming soft goods. Jay Meltzer, analyst at Johnson Redbook Service, said sales were above expectations for the first three weeks of the month, but were worse-than-expected for the critical final week of Thanksgiving. Commenting on Ann Taylor’s sharp decline, Meltzer said momentum early in the month was not sustained, a problem for other retailers, too. He added that the company improved its merchandise, but “the traffic wasn’t there.” An Ann Taylor spokeswoman said the company was up against tough same-store sales from last year’s November, which were up 18 percent. She added that inventory is down about 20 percent from a year ago.
Based on the same-store sales declines at Ann Taylor in October (down 13.2 percent) and November, Moody’s Investor Service lowered the firm’s $150 million secured credit facility two notches, to B1 from Ba2, and its subordinated notes to B3 from B1.
Moody’s said it expects Ann Taylor sales to remain sluggish for the rest of the year and continue to pressure margins. The investor service cited challenges from financial difficulties at Cygne Designs Inc., Ann Taylor’s major supplier. There was some good news from Ann Taylor. It received the proceeds of a $7 million mortgage on the land and building of its new distribution center in Louisville, Ky.
The Gap’s same-store sales were up only 1 percent and management is now guiding analysts on fourth-quarter earnings of 90 to 95 cents a share. Same-store sales were “very positive” at Banana Republic, “slightly positive” at GapKids, but “slightly negative” at Gap stores. As a result, inventory is slightly higher than plan, according to The Johnson Redbook Service. NatWest’s Buchanan had expected the company to earn about $1.08 a share. The news pushed the stock down 3 1/8 to 45 1/4 on the New York Stock Exchange.
Talbots’s same-store sales slid 3.3 percent, and The Limited’s declined 3 percent. Same-store sales were flat at Spiegel’s Eddie Bauer stores and United Retail Group Inc. Charming Shoppes Inc.’s same-store sales dropped 13 percent. Discounters, too, showed weakness this month. Wal-Mart Stores Inc., including Sam’s Clubs, said same-store sales rose 3 percent, down from last year’s gain of 5.2 percent. And the Mervyn’s division of Dayton Hudson dropped 6.5 percent, but the corporation’s same-store sales overall rose 1.7 percent; the Target division was up 5.6 percent. The department stores’ same-store sales slid 1.5 percent. Blaming increased competition, a shift in its promotional calendar and heavy snow during the company’s promotion days, The Bon-Ton said its same-store sales sank 9.8 percent.
Among regional discounters, Venture Stores Inc.’s same-store sales sank 15 percent, Dollar General Corp.’s decreased 3.1 percent and Ames Department Stores Inc.’s was down 2.6 percent. Sales were flat at ShopKo Stores Inc. Carson Pirie Scott’s same-store sales rose 3.6 percent, helped by strong performances of special-size apparel, better sportswear, coats and intimate apparel. Neiman Marcus Group Inc.’s same-store sales moved up 2.4 percent. Same-store sales were up in the low single digits at Neiman Marcus stores, and up in the mid single digits at Bergdorf Goodman. Sales at NM direct were flat for the month. J.C. Penney’s same-store sales edged up only 1.8 percent. A Penney spokesman cited solid sales of women’s outerwear, sweaters, juniors, cosmetics and accessories, but noted there was weakness in petites and special sizes.
Gottschalks Inc.’s same-store sales dropped 10.6 percent. Dillard Department Stores’ same-store sales edged up 3 percent, while department store comp sales at May Co. increased 1.5 percent.
At The Limited, same-store sales in women’s apparel were down 3.3 percent overall, with significant declines at all divisions. Lane Bryant’s same-store sales fell 8 percent, Express’s declined 6 percent, Limited Stores’ were down 2 percent and Limited Too’s dropped 8 percent.
Intimate Brands Inc.’s same-store sales eased up 1 percent. Same-store sales at Victoria’s Secret Stores slid 4 percent and at Cacique tumbled 17 percent. At Victoria’s Secret Catalog, they were up 8 percent; at Bath & Body Works, 17 percent.
Some off-pricers posted slight same-store sales gains: Value City Department Stores Inc., up 2.4 percent; Ross Stores, up 3 percent, and Filene’s Basement Corp., up 1 percent. TJX Cos.’ same-store sales, which do not include Marshalls, were flat. Goody’s Family Clothing’s same-store sales moved ahead 7.7 percent.

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