Despite Uncertainty, September Retail Comps Rise

In Reports, What's New, Industry News by Accessories Staff

Retail SalesNew York—Despite the daily drumming about economic uncertainty, comparable store sales continued to increase for most U.S. retailers in September.

According to Thomson Reuters which tracks 23 retailers, September comparable store sales, or same store sales, increased 5.1%. That’s better than analysts’ average estimate which expected a 4.6% increases. Comparable store sales increase in September 2010 was 2.7%.

Reasons for the increase varied: from late back to school shopping, increased promotions to get consumers into stores and increase transaction amounts to Hurricane Irene’s hitting the East Coast in late August and perhaps pushing sales into September.

Said Ken Stumphauzer, a retail analyst for Sterne Agee & Leach Inc.:“It’s incongruent with what’s going on in the market. It suggests that theU.S.economy is fine.”

While retailers reported an array of positives and negatives reflected in their figures, retail analysts said the relative strength is a positive sign heading into the crucial holiday shopping period.

“It’s setting up well for retailers, barring an implosion in Europe,” Ken Perkins, president of Retail Metrics, said. “Retailers are pulling out all the stops to drive traffic with deep discounting. Consumers need to be enticed to shop and that’s what is happening.”

Holiday Sales: Still at Risk?

Among the better performers were specialty chains catering to teens, young women and families such as Zumiez, Buckle and Limited Brands did much better than expected. Target Corp and Kohl’s Corp, both of which launched new exclusive lines, also beat Wall Street’s forecasts.

Others, such as Wet Seal and JCPenney, fell short of expectations. The largest percentage decline reported today was a 4% drop at Gap Inc.

“The customer is making choices, but importantly is showing for the second straight month that they could handle price increases…they will just buy one or two fewer units,” Brian Sozzi, retail analyst at Wall Street Strategies. However, Sozzi said there’s potential softness in “commodity-type women’s offerings which has middle America budget and job pressure written all over it.”

“To become excited, more retailers have to be doing well, and doing well on a more consistent basis month to month,” Sozzi said. “Even with those retailers beating consensus sales and earnings forecasts for third quarter, customer traffic is spotty, and as further higher ticket prices hit, may become spottier, hence elevating the risk to the holiday season.”

September’s comp sales may indicate that in a number of cases significant amounts of pre-holiday products were bought—at big markdowns in many cases—allowing for extra floor space.

“Looking at consumer confidence, employment and stock market volatility, I would think sales would begin slowing going into the holiday season,” Barbara Kahn, director of the Jay Baker Retailing Center at the Wharton School, told the Wall Street Journal. “That makes the holiday season itself hard to predict.”

Among the retailers who today reported monthly sales figures were:

●Macy’s Inc. reported a 4.9% growth in comparable store sales, beating analysts’ average estimate for 4.4%. Total sales rose 5.3% to $2.3 billion, from $2.18 billion last year. Online sales were especially strong, rising 43.3%.

Terry Lundgren, ceo, said “our business remains on track, despite the persistently negative macroeconomic news. We are feeling quite confident that we will continue to gain market share as we head toward the holiday selling season.”

Macy’s said expects third-quarter comparable store sales increases at the high end of its previous guidance of 4% to 4.5% and it still expects fourth quarter comparable store sales to be in the 4% to 4.5% range.

●JCPenney posted a 0.6% decline in comparable store sales while analysts’ average estimate expected a 0.6% increase. Last September, JCPenney had a 5.1% comparable store increase. Total sales declined 3.6% to $1.426 billion, from $1,480 billion last year.

While sales overall were softer than anticipated in September, children’s apparel and women’s accessories were the better performing merchandise.  The southeast region was the top performing geographic region.

The department store retailer now expects its third quarter comparable store sales to be flat instead of the previously forecast 2% to 3% increase.

●Kohl’s reported a 4.1% in its comparable store sales, nearly double the 2.2% increase that was expected. Total sales increased 5.8% to $1.63 billion. Kevin Mansell, ceo, credited the launches of the Jennifer Lopez and Marc Anthony collections as “generating excitement” that brought in consumers. Kohl’s also opened 31 new stores in September.

●Dillard’s Inc. reported that its comparable store sales increased 3%. Total sales, which excludes the company’s CDI Contractors LLC construction business, rose 2% to $542.5 million from $532.3 million last year. Sales in the centralU.S. had the strongest showing, while sales in Eastern states were slightly below the overall gain. Sales in the West were the weakest.

● Nordstrom Inc. said its comparable store sales surged 10.7% easily beating analysts’ average forecast for a 5.2% increase. Total sales rose 16.3% to $943 million. For the quarter to date, comparable store sales climbed 9T. Total sales increased 14.6% to $1.63 billion

●Saks Inc.’s comparable store sales rose 9.3%, topping analyst estimates for a 6.5% increase. Total sales rose 7.3% to $275 million from $256.4 million a year ago. Best performing classifications included women’s footwear, handbags, fashion jewelry, cosmetics, women’s contemporary apparel, and men’s apparel, shoes, and accessories. Saks Direct also performed well during the month.

Bon-Ton Stores said its comparable store sale dropped 3.6%. Total revenue fell 4.1% to $286.9 million. “Although our comparable stores sales performance did not meet our expectations, our strategic initiatives of footwear expansions, increased penetration of updated merchandise, and pilot store renovations with the ‘re-discover’ branding in those markets gained traction,” said Tony Buccina, vice chairman/president.

Best performing classifications included cosmetics, footwear, hard home and men’s furnishings.

●Stage Stores reported its comparable store sales declined 0.7%. Total sales of $118 million were flat compared with last year. Best performing classifications included cosmetics, footwear, home & gifts and junior’s. Geographically, the Southeast and Midwest regions had comparable store sales gains.

●Target posted a 5.3% increase in its comparable store sales better than the 3.9% analysts’ average estimate forecast. Total sales rose 6.5% to $5.92 billion from $5.56 billion last year.

Gregg Steinhafel, ceo, said the results were “somewhat” above the store management’s own expectations. “We experienced strong sales results throughout the month and across a broad array of merchandise categories,” he said, citing beauty and clothing as best sellers in addition to groceries. The discount retailer also said shoppers spent more at Target and more browsers were converted into buyers.

The company predicts its October comparable stores sales will rise in the low- to mid-single digit percentage range.

●Gap Inc. reported its total comparable store fell 4% which followed analysts’ average projection for a 3.8% decline. Total revenue edged up slightly to $1.35 billion from 1.34 billion a year ago.

But comparable store sales declined across divisons with international sales sliding the most, down 13%. Gap North American’s comparable store sales fell 4%, Banana Republic and Old Navy both declined 1%.

Glenn Murphy, chairman/ceo, acknowledged that the results were unimpressive, but remained optimistic for the future.

“While there were some bright spots across our brands and business units, we’re clear and focused on the steps necessary to improve our business performance going forward,” he said.

 ●Limited Brands Inc. reported a comparable store sales increase of 11%, more than double the 4.6% increase analysts’’ average estimate forecast. Total sales rose to $818.6 million from $735.8 million last year.

●Destination Maternity said its comparable retail sales, which include online sales and same store revenue, climbed 2.4% in September. Online sales surged 35.5%. For its fourth quarter, comparable store sales declined 4.1%. Total revenue rose 4.2% to $129.4 million.

Ed Krell, president/ceo, said the quarter’s performance was hurt by promotions and additional markdowns instituted to drive sales and manage inventory. He also said that the company’s leased department expansion with Macy’s likely hurt its fourth-quarter same store sales by between 1 and 2 percentage points and hurt its full-year performance by about 1 percentage point.

●Buckle Inc. reported a 10.3% increase in comparable store sales, sailing past the 3.8% that analysts’ average expected. Total revenue sales climbed 13% to $98.4 million. For the year to date, comparable store sales gained 8.7%, with total revenue up 12.2% to $646.2 million.

●Zumiez posted a 10.1% increase in comparable store sales, below the 17% increase in September 2010 but ahead of analysts’ average estimate for a 3.2% increase. Total sales rose 18.3% to $52.9 million. The company reported an increase in transaction amounts. Best performing categories were men’s footwear, accessories and clothing for boys and juniors, but sales of hard goods were soft.

Zumiez expects its third quarter net income a share will range from 40 cents to 41 cents, up from a prior estimate range of 37 cents to 39 cents on sales between $150 million to $152 million.

●Wet Seal Inc. posted a 0.3% drop in its comparable store sales when analysts’ average estimate expected a 3.8% rise. Total revenue rose 4.8% to $53.6 million.

Business slowed at Wet Seal and Arden B stores after the Labor Day weekend, said  Susan McGalla, ceo, who added that margins on merchandise improved because of “disciplined and more strategic” promotions and inventory management. Online revenue fell 22% as the company focused on selling more items at full price.

Wet Seal said it expects to earn between 5 and 6 cents a share in the third quarter in line with previous forecast. But it said comparable store sales will be “slightly below” its outlook of “mid-single digits” growth.

●Ross Stores raised its third quarter earnings estimate after posting a stronger-than-expected September when comparable store sales increased 5%. Analysts’ average estimate expected a 3.4% increase. Total sales rose 9% to $726 million.

“September same store sales were ahead of our expectations for a 1% to 2% gain as our value-focused offerings continue to resonate with customers,” said Michael Balmuth, vice chaiman/ceo. “Juniors, dresses and shoes were the strongest merchandise categories, whileFloridawas the best-performing market.”

The company now expects to earn between $1.16 and $1.18 a share in the third quarter, up from its previous estimate of $1 to $1.04 per share.

●Stein Mart said comparable store sales fell in 1.7 % as sales in the Gulf Coast and Southeast slowed. Total sales fell 2.5% to $98.9 million. The company said its weakest results came in the Gulf Coast and Southeastern states other than Florida, while sales in California and the Midwest were better than in other regions. Best performing categories included dresses, intimate apparel, costume jewelry, men’s furnishings, and home textiles.

●Cato Corp. said its comparable store decreased 3% from the prior-year period. Total sales declined 2% to $70.7 million, from sales of $71.9 million last year.

“September same-store sales were in line with our recent trend and reflect the very challenging retail apparel environment,” said John Cato, chairman/president/ceo.

While the September figures were below original estimates, the company said it still expects third quarter earnings to be at the low end of the range of 18 to 21 cents a share.

●TJX Cos., which operates T.J. Maxx, Marshalls, and HomeGoods, said comparable store sales rose 4%, exceeding company expectations. Total sales were up 6% to $2.2 billion. Noting that Marmaxx, the division with T.J. Maxx and Marshalls, posted a 5% comparable store sales increase, Carol Meyrowitz, ceo, attributed the increase to sales of brand name apparel and home furnishings.

“We continue to see customer traffic increases and believe our above-plan comp store sales speak to the draw of our great values. It’s important to note that our September sales were not promotionally driven and merchandise margins in September remained solid,” Meyrowitz said.

●Costco Wholesale Corp. reported a 12% rise in September same store sales, ahead of 10.1% analysts’ average expected. Nonetheless the warehouse club saw its margins hurt and said it is raising its membership fees by 10% on Nov. 1.

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