SEPT. SALES BEAT FORECASTS
Byline: Jennifer Weitzman
NEW YORK — Fall may be in the air, but it’s hardly the word to describe most retailers’ same-store results in September.
Many of the nation’s retailers turned in slightly better-than-expected results for the month, with department stores showing improved performance, while discounters were held back due to higher oil prices.
Although representing an encouraging rebound for many from disappointing August results, there have been better falls. Same-store sales rose 4.4 percent compared to 7 percent a year ago, according to Credit Suisse First Boston’s average tally of 54 chain stores.
September, analysts said, clearly showed that consumers have taken to this year’s fall fashions. Although there were pockets of poor performance — most notably Gap’s 8 percent decline and decreases of 6 percent at Dillard’s, 12.8 percent at BeBe and 12 percent at Eddie Bauer — many retailers were able to pull out of the summer blues this month.
Describing himself as “impressed” with September’s results, PaineWebber’s Richard E. Jaffe said many underestimated the magnitude of their return.
“I was convinced that teens would not be going naked this fall,” he said a bit sardonically. “August cast a doubt on that conviction, but September’s results confirmed my original convictions, there will be apparel sales.”
Strong gains came from Chico’s FAS, Hot Topic, and Talbot’s, while Neiman Marcus, Kohl’s and Nordstrom enjoyed strong apparel results. Still, most of the discounters turned out negative comps or only slight improvements.
Shari Schwartzman Eberts with J.P Morgan said because department stores’ fall products are more attractive and wearable and better accepted by their customers, results were slightly better than expected. She was especially pleased with Kohl’s “tremendous” comp gain of 9.8 percent. Federated’s 2.9 percent gain was on plan and May’s 0.7 percent gain was close to plan.
Brad McGill with Banc of America Securities said fall sales stabilized this month due to lower expectations, new product flow and aggressive promotional activity.
The higher-end department stores did even better. Nordstrom surprised most with its strong result. The Seattle-based retailer had 7.9 percent positive comp and Neiman Marcus rose 19 percent.
Brooke White, a Nordstrom spokeswoman, said the improved result is “the culmination of the fruits of our labors we began last year.” The company recently shook up its merchandise mix and expanded into the modern market. They also added a single merchant over each merchandising segment.
Still, while women’s apparel has improved, White said the company is “still not where we would like to be.”
Jennifer Black of First Security Van Kasper, said, “Nordstrom, for the first time in a long time, had an improvement in its women’s apparel business.” In fact, she noted women’s apparel reached a positive low single-digit gain after years of having negative comps. Neiman Marcus spokeswoman Jana Mannes said that by focusing on key merchandise categories, Neiman’s continues to drive momentum. In particular, she said fine apparel was up 30 percent, reflecting the success of its “trading up” strategy. She also noted that the addition of a more contemporary collection has been well received.
Not all department stores satisfied consumer demand. Both Dillard’s and J.C. Penney Co. comps were down; 6 percent and 4 percent, respectively. Penney’s said the 4 percent comp decline at its department stores was driven by higher-than-planned promotions, and it revised downward its third-quarter estimates to a possible loss. All merchandise categories were soft, except for a low-single digit gain in women’s, fueled by career sportswear.
Eberts said this month’s softness among the discounters — but not the department stores — could be an indication that higher gas prices and the potential for higher home heating costs could be having a bigger impact on the disposable income of the discounters’ customers than on those of department store shoppers.
Wal-Mart reported a 4.2 percent increase in comps, which was on the lower end of its plan. Target (3.5 percent increase) and Kmart (up 2.4 percent) were both below plan with sales boosted by clearance activity.
Although most analysts remain cautious about holiday sales considering gas prices and difficult comparisons from 1999, they said at least September was a positive step. Still, although they were happy with the results, most questioned if they signaled the beginning of a turnaround for retailers.
Mark Picard with Lazard Freres said that, although September’s broadline results “clearly mark an improvement over August, sales have been difficult, since consumers backed off a notch.”
He noted that fashion created a buzz with animal prints, sleeveless turtleneck sweaters and longer skirt bodies in python and leather, but warned of possible promotions. Specialty stores turned up the heat in September. Jeff Klinefelter, with U.S. Bancorp Piper Jaffray, said September was anticipated to be a difficult month for specialty retailers because of earlier lackluster sales. Fortunately, he said the stores fared best in apparel and indications are bright — traffic is there and spending is not a problem. The company that has the right product should do very well, he said
To PaineWebber’s Jaffe, a specialty store’s advantage is its singular vision, helping to differentiate it from department stores that have many things for many people. “You know what you are getting,” he said, adding that he is encouraged for the rest of the year. Saying consumer confidence about the future of the economy remains high, Jaffe said, “Consumers are shopping, she will continue to shop and are liking what they find.”
Jaffe said knockout performers included Pacific Sunwear and Talbot’s. The latter, he noted, “really refocused its merchandise to include more than its traditional classics, but also sportswear and casualwear.”
Margery B. Myers, a spokeswoman for Talbot’s, said September was a month when everything performed well. Specifically, she said business is balanced between casualwear (such as a bi-stretch pants, corduroy, denim, moleskin, poor boy sweaters and tops) and careerwear with jackets, skirts and trousers.
The Limited had a 10 percent increase in comps. Apparel comps increased 10 percent and was significantly ahead of expectations.
By brand, Express comps were up 19 percent and were helped by sales in fur, gold denim, leather and woven pants, as well as tops. Lehner New York comps were up 5 percent and were helped by two campaigns, including a $19 pleather and stretch mercer shirt, and the sexiest pants in the city, which featured its bottoms. Five stores have begun to reopen with the New York Company name this week, with the balance to open later this month and in early November. Lane Bryant comps were up 2 percent, with tops on top. The Limited comps were up 8 percent and sales were led by the virtual stretch line. Structure comps were up 11 percent, and were driven by the sales event held during the month.
But specialists’ results were mixed. Abercrombie & Fitch, whose comps were down 2 percent compared to a 15 percent increase last year, said average selling prices in September were down significantly, with the biggest decrease in women’s wear. In addition, September’s business was consistent with the back-to-school trends established in July and August. The company said the women’s business continued to show dramatic improvement, generating positive comps versus negative comps for the men’s business. Eddie Bauer’s comps were also down 12 percent, although up from August’s 20 percent drop. A company spokeswoman said the company is working on merchandising issues to expand its business casual lines, which have performed well, to all stores. The next floor set, which will introduce its holiday offer, is expected to reflect those changes and will arrive in stores in late October and early November.
BeBe, down 12.8 percent, is taking the necessary steps to better address the needs of its target customer with its fall 2000 product assortment, Klinefelter said in research notes. In addition, due to increasing competition, he said the company has introduced entry-level price points in key categories.