NEW YORK — Even last-minute exposure to ultraviolet rays couldn’t salvage May’s same-store sales results.
After an unseasonal start characterized by cool, wet weather in many parts of the country and apparent consumer indifference throughout, spring-like temperatures arrived just before Memorial Day and, to a limited extent, helped redeem the month’s results.
However, the absence of more compelling trends made cooler weather a more pressing factor.
“If you were not selling significantly differentiated fashion or must-have items, you were significantly affected by the weather,” said Ladenburg, Thalmann & Co. analyst Eric Beder.
“Fashion-driven products are not really weather dependent,” he noted. “You’re trying to show off that you’re in fashion and that has very little to do with the weather.” By way of example, some broad-based retailers managed to do well in decidedly spring merchandise like swimwear and tank tops, despite the weather.
Generally, department stores failed to rebound as much as specialty formats during the rush at the end of the month, while discounters, with their softline assortments buttressed by consumables such as food and other products, continued their charge.
Overall, Goldman Sachs’ monthly comp-store index ramped up 2.4 percent, ahead of the projected 2 percent increase. Discount stores did the heavy lifting, though, with a 5.9 percent increase in May, while department stores dipped 3.4 percent and specialty apparel/off-pricers slid 1.4 percent.
Of retailers surveyed by WWD, 30 out of 50 comped down during the month.
Specialty stores bucking the trend and piling on comp increases included Chico’s FAS (up 13.6 percent), Wet Seal (7.3 percent), The Limited Brands (5 percent), Pacific Sunwear (3.1 percent) and Claire’s Stores Inc. (1 percent).
There were plenty of stores on the downside, though. Gap Inc.’s 9 percent same-store decline kept alive a streak of 26 consecutive months without an uptick, but was still the smallest decrease since comps last June were off 7 percent. The marque division saw comps plummet 15 percent, while Banana Republic slid only 1 percent and Old Navy dipped 4 percent.
William Blair & Co. analyst Ellen Schlossberg noted: “Both Banana Republic and Old Navy showed improvement in sell-through rates of the new product versus spring. It was not markdown driven. It was truly a better response to better merchandise.”
There were no such accolades for Spiegel Group’s Eddie Bauer division, which comped down 21 percent. Other specialty players heading southward included Abercrombie & Fitch (down 9 percent), American Eagle Outfitters (7.1 percent), Ann Taylor Stores (5.2 percent) and Talbots (3 percent).
“Players that had highly differentiated items in the mall did well,” observed Beder. “The department store in some respects, especially the middle-level department stores, have given up the fashion leadership and that’s gone more to the specialty stores.”
That point played out dramatically in last month’s results. Department stores registering declines included The May Department Stores Co. (down 7.6 percent), Federated Department Stores (3.4 percent), J.C. Penney Co. (5.1 percent) and Sears, Roebuck & Co. (4.4 percent).
As usual, and perhaps fittingly for a store that defies standard categorization, Kohl’s Corp. was in a class by itself with an 8.7 percent comp jump. Schlossberg noted: “Kohl’s just defied gravity here, with respect to selling apparel in swim, tanks and shorts, when a lot of other retailers weren’t having luck there with the weather.”
While she attributed part of this to better traffic at Kohl’s, Schlossberg also noted the firm’s success in those categories proves “there is some appetite for these goods.”
Wal-Mart Stores Inc. and Target Corp. each improved over a year ago, posting increases in their discount stores of 6.8 and 4.6 percent, respectively. While Wal-Mart’s sales came in on plan, and ahead of many expectations, Target’s results were “modestly below plan.”
Now that the weather appears to have turned, will retailers benefit in June from a rush of consumers needing shorts and tank tops? “That’s the billion-dollar question,” said Midwest Research’s Jeff Stinson. “There probably is some pent-up demand for spring and summer product,” he said, but retailers are generally in a good position from an inventory standpoint. “Even if that demand does not show up like I think it will, you will not have retailers incredibly exposed” to excess inventory, he said.
Angela Selden, North American managing partner for Accenture’s retail industry group, saw May’s sales as a departure from recent trends. “At the front half of the year, we really saw an orientation toward value only. Now what is emerging is a combination of value and style,” a combination from which some specialty retailers have been able to reap benefits, she said. “There’s a big challenge the higher price point specialty retailers, like Ann Taylor and Talbots, are facing”
Other retailers are finding success with a “laser focus on the customer who is most important” to them, she said. Chico’s FAS and Hot Topic Inc. are two such niche players who continue to see rising comps.
Department stores should continue to be plagued by weak results, she added. “Until the department stores fundamentally change who their customer is and how they merchandise to meet the changing needs of that customer in their stores, they’re going to struggle.”
Selden asserted that weather “can’t be the overriding factor. If any retailer overemphasizes an external factor that’s preventing them from posting positive comps, they haven’t been honest with themselves about some of the internal factors that they could be changing.”
Gap Inc. reported May comparable-store sales dropped once again, this time falling 9 percent, better than the company had forecast.
“Overall, sales exceeded our beginning-of-the-month projections,” said chief financial officer Heidi Kunz in a prerecorded call. “We saw sequential improvement in comps throughout the month and we are pleased with the progress we’ve seen, especially in Old Navy and Banana Republic. Regionally, the Northeast performed the best with results weakest in the West and Midwest.”
Gap’s total company merchandise margins were roughly flat compared with last year, with Old Navy and Banana Republic’s slight margin improvements being offset by margin declines at Gap. Comparable-store traffic also declined in May, falling 13 percent compared with a 16 percent decrease in April. The company did finish the month with inventory on plan.
On the other side of the ledger, Limited Brands reported a 5 percent increase in consolidated comparable-store sales. Limited Stores led the charge with a 14 percent jump in May same-store sales, while Express contributed with a 9 percent increase in comps. Learner New York reported comps rose 8 percent and Victoria’s Secret and Limited Brands each grew 5 percent. Only Bath & Body Works, with a 4 percent fall, reported lower comps.
Unseasonably cool weather caused Ann Taylor Stores Corp. to report May same-store sales declined 5.2 percent, but the New York-based company remains confident in its guidance.
“We were pleased with the quality of our May sales to our strong full-price selling at both divisions, which resulted in stronger year-over-year gross margin for May,” said chairman J. Patrick Spainhour. “Based on improvement in the fourth week’s business, we continue to believe we will experience flat comparable-store sales for June and July. As a result of the May gross margin performance, we remain comfortable with current fiscal-year earnings guidance in the range of 25 to 27 cents for the second quarter; 45 to 46 cents for the third quarter, and 32 to 33 cents for the fourth quarter.”
Most department store chains endured same-store sales declines in May, highlighting difficulties facing the sector struggling more than ever to reinvent itself.
May Co., parent of Lord & Taylor and Hecht’s, comped down 7.6 percent for the month, while total sales slid 4 percent to $1.05 billion. Same-store sales for the year to date were down 3.7 percent. Federated’s comparable-store sales sank 3.4 percent, while total revenues fell back 0.8 percent to $1.15 billion. Comps for the 17-week year-to-date period were down 3.1 percent. Chairman and chief executive officer James Zimmerman, in a statement, noted: “The end of the month was a disappointment.” Cold weather, he said, “probably is a large part of the reason for this negative performance.”
While Kohl’s comps jumped 8.7 percent, total sales during the month were up 24.8 percent to $596.2 million.
Showing improvement of late, Penney’s slipped in May with a 5.1 percent comp decrease. Taking some of the blame were stronger-than-planned first-quarter sales, which drained inventories of key merchandise categories including juniors, young men’s, children’s and footwear. Though sales in May were below plan, Penney’s continues to stand behind its full-year operating profit projections of 90 cents to $1 a share.
Saks Inc.’s consolidated same-store sales retreated 3.3 percent with a 1.2 percent setback among its department stores and a 6.4 percent drop at the Saks Fifth Avenue unit. In the department stores, women’s better and special-size apparel were among the strongest performers, while the SFA unit saw some of its best sales from jewelry, women’s contemporary sportswear and American designer collections.
Dillard’s Inc. posted a 1 percent comp decline. Regional department stores posted mixed results with Gottschalks Inc. dipping 2.6 percent, The Elder-Beerman Stores down 1.3 percent and The Bon-Ton Stores picking up a 4.5 percent boost.
Consolidated comparable-store sales at Wal-Mart, the world’s largest company, jumped 6.2 percent in May. The total was outpaced by the flagship division with a 6.8 percent increase, while Sam’s Club underperformed with a milder 3.7 percent rise.
Target’s total comps gained 2.6 percent with a 4.6 percent hike at the discount stores, a 10 percent slide at Mervyn’s and a 0.1 percent dip at Marshall Field’s.
Noting that sales came in “modestly below plan,” chairman and ceo Bob Ulrich, in a statement, added: “At Target Stores, strong sales in the final week of the month substantially offset the sales softness we experienced in the first three weeks.”
Other value-oriented retail concepts generally saw comp declines in May. Value City Department Stores was down 3 percent; Factory 2-U Stores, 16.6 percent; ShopKo Stores, 2.1 percent, and Stein Mart, 2.8 percent.
Bucking the trend were two powerhouse off-price chains, TJX Cos., posting a 3 percent uptick in May comps, and Ross Stores, with a robust 10 percent jump.