NOV. COMP-STORE SALES BUOYED BY DISCOUNTERS
Byline: Jennifer Weitzman / Evan Clark
NEW YORK — Unrelenting promotions helped push major stores into positive comparable-store territory in November, but they weren’t sufficient to keep Gap Inc. from reporting a 25 percent drop in comps for the month.
While slightly short of expectations, the results, dragged down by the gloomy economic climate and unseasonably warm weather, could have been even worse. “Retailers managed to avoid a disaster,” said Lazard Freres analyst Todd Slater. “Sales were lighter than planned and margins are under more pressure, but it could have been even worse if not for the aggressive promotions.”
Overall sales trends mirrored October’s results, giving discount and value-oriented chains like Kohl’s (up 25.9 percent), Target (up 13.5 percent) and Wal-Mart (up 4.3 percent) more of the consumer’s dollars while department and specialty store groups collected relatively fewer.
According to the Goldman Sachs November Comparable-Store Sales index, comps last month grew 2 percent, below the 3.4 percent expected for the month and actually reported in October. Discount stores gained 4.2 percent while department stores, most bolstered by extra selling days which they will lose in December, grew 1.7 percent. Although improved comp performances came from Chico’s FAS (18.7 percent, as reported), Hot Topic (3.4 percent), Wet Seal (1.3 percent), Victoria’s Secret Stores (9 percent) and Ann Taylor (0.8 percent), Gap’s 25 percent plummet and Eddie Bauer’s 21 percent nosedive pulled the entire sector down to a comp decline of 9.2 percent, far below expectations.
Shari Schwartzman Eberts at J.P. Morgan said she expects department store comps to fall 5 to 10 percent and discounters to gain 3 to 6 percent for holiday.
Gap warned on a conference call it expects the current negative comp and gross margin trends to continue for the remainder of the fourth quarter, and, as a result, said earnings per share would be considerably worse than the third-quarter loss, excluding tax-related charges, of 6 cents a share. Spiegel, Bauer’s parent, also warned fourth-quarter results are expected to be below previous earnings guidance of 25 to 30 cents a share.
All three of Gap’s units contributed to its precipitous drop, but Old Navy’s drop of more than 30 percent was the most severe. Gap’s comps retreated in the mid-twenties and Banana Republic’s in the low-double digits. Gap’s chief financial officer Heidi Kunz said on a conference call that the company was “executing on our strategy to improve products in all brands.” In addition, she said first-half inventories will be lower and space expansion plans have been trimmed to about 5 percent a year with no new real estate deals in the works for 2003.
Comps at The Limited and its Intimate Brands subsidiary fell 7 and 6 percent, respectively, in November. Apparel comps at Limited declined 7 percent, with all units negative: Express, 2 percent; Lerner New York, 14 percent; Limited, 3 percent, and Structure, 15 percent. Victoria’s Secret’s 9 percent comp increase was driven by transactions around its Nov. 15 fashion show
A continuing weak sales trend at Abercrombie & Fitch drove comps down 5 percent, but the company reaffirmed First Call earnings estimates of 70 cents, lower than the 76 cents it earned last year. Other specialty stores posting declines included Bebe Stores, 10.3 percent; American Eagle Outfitters, 9.6 percent; Talbots, 12 percent; Pacific Sunwear, 2.3 percent; Claire’s, 6 percent; Gadzooks, 8.8 percent, and The Buckle, 5.5 percent.
Although the extra week of selling inflated Kohl’s Corp.’s industry-leading 25.9 percent comp gain, the firm said that, taking November and December together, it’s expecting comps to grow in the mid-single digits. Year-to-date, Kohl’s sales in existing stores have risen by 8.4 percent.
Federated Department Stores’ comps inched up 0.9 percent for the four weeks and came in on target with the firm’s expectations. The operator of Bloomingdale’s and Macy’s expects same-store sales to be down 11 to 14 percent in December and to be off 7 to 10 percent for the fourth quarter.
Lord & Taylor and Hecht’s parent May Department Stores Co. posted a 0.6 percent decrease in comps for the month, making for a 3.1 percent dropoff for the year to date. Comparable-store sales for Saks Inc., benefiting from an extra week in November, rose 2.9 percent on a 3.5 percent increase at the department stores and a 1.8 percent uptick at the Saks Fifth Avenue division. Comps at the latter’s flagship here slid 4 percent for the period. Nordstrom fell 5.2 percent as full-line stores outperform The Rack.
J.C. Penney Co., which did not have an extra week in its fiscal period, saw a 0.6 percent comp rise in its department stores with strength in home and men’s and women’s apparel. While sales were at the lower end of management’s expectations, the firm is still looking for operating earnings of 30 to 35 cents a share for the full year. Benefiting the early Thanksgiving, though not an extra week, Dillard’s same-store sales rose 4 percent with women’s and juniors’ both up 5 percent. Sears, Roebuck & Co.’s comps surrendered 1.3 percent with gains in several hardline categories offset by weakness in apparel, especially seasonal merchandise.
Wal-Mart Stores’ 4.3 percent comp increase was in line with its 4 to 6 percent projection. Same-store sales at the Wal-Mart division were slightly stronger, advancing 4.5 percent, despite inactivity in cold-weather apparel categories.
Target Corp.’s comps jumped 11.4 percent, but were down 0.1 percent after accounting for the extra week and were “slightly below plan,” according to chairman and chief executive Bob Ulrich. Same-store sales at the flagship division were up 13.5 percent, but rose 1.1 percent on an adjusted basis. Comps at Kmart Corp. declined 2.6 percent.