Holiday Pressure: November Comp Sales Disappointing

Holiday ShoppingNew York— Black Friday creep—expanding sales and promotions beyond the traditional one the Friday after Thanksgiving—may have had an unintentional effect. Consumers may be lured in by promotions but purchasing isn’t as strong as hoped for.

According to several metrics, November comparable store sales were modest—actually decelerating from October increases.

Thomson Reuters reported November comparable store sales rose just 1.9%, less than the 2.7% increase it had projected. Excluding drugstores, comp store sales rose 1.2% compared with analysts’ average estimate for a 2.3% increase.

Another measure from Retail Metrics found comparable store sales were also up 1.9%, a sharp drop from a 4% increase in October.

Pressure to Take ‘Desperate Measures’?

“The overall results were very disappointing,” said Ken Perkins, president of Retail Metrics. “Santa delivered some early coal to retailers during November and during the Thanksgiving/Black Friday holiday weekend. It says that retailers are in for a real dogfight this holiday season.”

As the holiday season continues, Perkins said he believes retailers will increasingly have to “”squeeze blood from a stone” providing even more discounts to lure budget-conscious consumers to spend. That may mean that retailers will have to offer 50% or more to get accomplish that.

The National Retail Federation Sunday said Sunday that U.S. shoppers had spent 2.9% less this year over the Thanksgiving/Black Friday weekend, the kickoff to the holiday season.

Meanwhile, The Conference Board, an industry group, said last week that U.S. consumer confidence fell in November after a sharp drop in October as Americans worried about their future jobs and earnings prospects.

Several retailers reported missing their November comparable store sales estimates including Costco, L Brands, Zumiez. Gap Inc. beat its comp forecast, and JCPenney, which has resumed releasing monthly comp sales report, surprised with a 10.1% increase in its comp sales. However, the “environment will remain as competitive” throughout the holiday season, CEO Myron Ullman noted.

Off-price retailers, however, seem to be bucking the trends, buoyed by consumers looking for brand names for less.

Thomson Reuters analyst Jharonne Martis predicted that retailers may resort to more drastic promotions like Kohl’s move to stay open for 100 consecutive hours.  “Unsold merchandise for the holiday season can add pressure on retailers to take desperate measures,” Martis said.

Moreover, Martis said “analysts have been slashing their outlook for the holiday season. Our Thomson Reuters Quarterly Same Store Sales Index, which consists of 75 retailers, is expected to post 1.7% growth for fourth quarter (vs. 1.6% in Q4 2012). This is below the 3.0% healthy mark.”

The vast majority of retailers, including the major department stores and mass merchants, no longer report monthly sales data, making it difficult to get a snapshot of the entire industry but here are a few that still do:

●L Brands, the owner of Victoria’s Secret and Bath & Body Works, said Thursday that its November comparable store sales fell 5.5%–a drop greater than analysts’ estimate for a 1.1% decrease and the retailer’s biggest drop since a 4% decrease in October 2009.

Total revenue rose 7 percent to $988.5 million from $922 million.

“As we mentioned last month, the later Thanksgiving this year negatively impacted November” comp sales, said Amie Preston, chief investor relations officer. But Black Weekend sales met expectations with total sales, including online, up 9%, Preston added.

Looking ahead, L Brands predicted low- to mid-single digit comparable store sales increases for December.

●American Apparel, Inc. reported its November comparable sales grew 1%, including a 1% growth in comparable store sales in the retail store channel and a 4% increase in net sales in online. Wholesale net sales slid 4%. However, preliminary monthly total net sales came in only 1% down to $49.2 million.

“We are encouraged by the momentum in comparable store sales particularly at the end of the month, as we increased the efficiency and effectiveness of our La Mirada distribution center and made improvements in our in-stock store inventories,” said Dov Charney, chairman/ceo. “Our new distribution center is fully operational and we have made significant progress in reducing the operating cost of the center. Additionally, as we are able to adjust our focus back to our core competencies surrounding assortment and production planning and product development, we expect to see a corresponding increase in sales in our stores.”

●Gap Inc. CEO Glenn Murphy said: “We are pleased with how we competed and delivered in November, providing a seamless experience for our customers whether they shopped in stores, online or on their mobile devices.”

Total comparable store sales rose 2% ahead of 0.8% growth estimates analysts predicted.

Total net sales rose 8% to $1.63 billion (Gap Inc. said the difference between its 2% comp sales increase and the 8% net sales growth is primarily attributed to the calendar shift in fiscal November 2013 versus fiscal 2012.)

By global brands, comparable store sales were up 2% at Gap global vs. 4% a year ago.

Banana Republic global was down 1% compared to a 3% increase a year ago, and Old Navy global was up 3% vs. a 1% increase a year ago.

●Buckle Inc. reported November comp store sales fell 0.6%, slightly more than the 0.5% decrease analysts had expected. Total net sales for November increased 4.6% to $101.2 million.

●Zumiez posted a 1.7% increase in its November comparable store sales compared to a 4.2% decrease in November 2012. But that still was far behind analysts

Forecast for a 2.8% rise.

Total net sales increased 16.3% to $62.4 million, compared to $53.6 million last year.

●Cato Corp. reported its November comparable store sales were flat while total net sales rose 4% to $67.3 million.

John Cato, chairman/president/ceo, said: “We continue to expect that the remainder of the holiday shopping season and fourth quarter will be difficult.”

●Stein Mart Inc. reported comparable store sales in November were up 3.1%. Total net sales increased 7.7% to $119.9 million, compared to $111.4 million, previous year.

The company said its linens, dresses, women’s boutique, and women’s career and casual sportswear posted the strongest sales for the month, while women’s accessories, men’s furnishings and men’s sportswear were more challenged. Geographically, November sales were strongest in Texas, while the Midwest performed lower than the chain.

●Costco Wholesale Corp. said its November comp store sales rose 2%, missing analysts’ estimate for a 3.3% increase. The company blamed a drop in consumer electronics sales for the sales miss.

Total revenue rose 5% in November, to $8.9 billion, and also increased 5% for the three months ended Dec. 1, to $24.5 billion. U.S. comp sales for the quarter were up 4% excluding gasoline.

Traffic increased 4.25% in November but average purchase size was down 2%, the company said.

 

 

 

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Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com