NEW YORK — November comps were a reversal of fortune at retail as several of the top-hot performers, such as the high-end department stores, posted surprisingly weak results while other retailers watched their same-store sales soar.
The retailers who delivered more robust results had successful promotions over the Thanksgiving weekend to thank.
Overall, November’s results show that holiday could prove to be unpredictable. Analysts, however, remain optimistic that spending will ratchet up in the weeks leading to Christmas, and at least be decent in the combined November-December sales period.
One of the standouts in November was Wal-Mart discount stores’ 3.8 percent same-store sales increase, which beat Target’s 2.6 percent gain for the first time in more than 20 months. Conversely, with comps down 2.3 percent, Saks Fifth Avenue Enterprises posted its first negative comp in more than two years.
“These [November] results were perhaps uninspiring, but were not disappointing enough to cast gloom over prospects for holiday sales,” said John Lonski, chief economist with Moody’s Investors Service, who follows same-store sales at 60 retailers, including electronics stores. November’s results were “in-line with expectations of perhaps a somewhat slower rate of growth for holiday sales compared to a year ago,” he said.
Nordstrom Inc. and the Neiman Marcus Group, two luxury retailers that had been posting robust comps for the past two years, clocked November gains of 2.8 and 4 percent, respectively. And usually strong Federated Department Stores posted a 3.4 percent decline in November comps at its Macy’s and Bloomingdale’s stores.
Meanwhile, J.C. Penney Co. continued its turnaround, posting a 3.6 percent rise — its best in five months.
In the specialty channel, there were also some surprises. Aéropostale Inc. had a better-than-expected 7.3 percent rise in comps, while competitor American Eagle Outfitters Inc. had a slight 1.7 percent increase, compared with comps that have been up in the double-digits for the better part of the last year. Meanwhile, Limited Brands Inc. bounced back from disappointing comps in recent months with a consolidated 5 percent increase.
Among the 50 retailers tracked by WWD, 33 firms posted positive November comps, 14 posted declines and one, Hot Topic Inc., had comps that were flat with the prior year. With a 6.9 percent average November comp-store sales increase, the specialty retail sector outpaced mass merchants and department stores, who each had an average 1.1 percent increase in comps.
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According to the International Council of Shopping Centers, November same-store sales rose 3.5 percent overall, versus a 4.4 percent rise in October and a 1.8 percent rise in November 2004. In a report released Thursday, Michael Niemira, chief economist at the ICSC, pointed to “market share swapping” as a key November theme. The luxury sector, he said, had its smallest aggregate performance since April, while also noting the flip-flop in results from Wal-Mart and Target.
Indeed, Wal-Mart’s comp gain outpacing Target’s sales increase demonstrated how serious Wal-Mart is about promotions and making up for last year’s blunder on not being promotional enough early in the season. The company said in a recorded call that 10 million people visited its stores during 5 a.m. and 11 a.m. on Black Friday. Big sellers included computers, dolls, portable DVD players and video games.
Mark Rein, senior manager of consultancy Capgemini’s global retail practice, chalked up the diverse November comp results within sectors to varied approaches to promotions — discounters are famous for Black Friday specials while luxury stores tend to shy away from heavy promotions. To that end, analysts agree that it’s too early to worry about luxury spending tapering off after just one month of lower-than-usual sales results.
“What you’re seeing here is some stores that have done well all year that have discipline that were not going to get into this promotional frenzy,” said Rein, who visited the Mall of America in Bloomington, Minn., on Black Friday, where the busiest stores were Apple, Coach and Urban Outfitters.
“I think a lot of the people who go out in November, especially on Black Friday, are the bargain shoppers. And I think that some of these retailers that have been up all year are trying to shake that curve to kind of spread out revenue a little more evenly across the entire year, instead of relying more heavily on the fourth quarter,” said Rein.
He cited American Eagle as one who has not focused on discounts as much as rival Aéropostale, whose store at the Mall of America Rein described as “a mob scene” on Black Friday. Aéropostale said in a recorded call that November’s sales were driven by the Friday and Saturday after Thanksgiving, when comps that week rose in the 30 percent range. Aéropostale cited strength in men’s and women’s denim, women’s sweaters and jewelry.
American Eagle said in a recorded call that it expected higher sales during the last week of the month. Sweaters underperformed, the company said, while denim, knit tops, outerwear and gift card sales were strong.
American Eagle also lowered its fourth-quarter earnings-per-share projection to 70 cents to 72 cents, including a 2 cent tax charge, from a prior estimate for 73 cents to 75 cents. Analysts are expecting 74 cents.
Lonski credited the “sharply lower” price of gasoline for the sales boon at some retailers, among them the likes of Ann Taylor Stores Corp. and New York & Co., which each saw comps climb 12.9 percent. The Energy Information Agency said in a Nov. 28 report that gas prices at the pump are down 16.9 percent from October.
“That is the deepest such decline in percentage terms on record,” Lonksi said.
Retailers and analysts are now turning their attention to December to see how sales perform in the two weeks directly after the Thanksgiving shopping weekend. “This is a time for retailers to reevaluate their promotional plans, if sales fail to meet their expectations,” Niemira wrote in his report.
For Lonski: “It’s shaping up to be a decent holiday shopping season. I wouldn’t be surprised if we find after an early December lull that it picks up momentum moving toward the 25th and it continues through the first couple weeks of January.”
And Chris Donnelly, a partner in Accenture Ltd.’s retail practice, also feels optimistic. “Consumer confidence is up, gas prices are down, the stock market is up. There is, via a confluence of all those factors, a wealth effect that’s hitting at a very good time,” he said.
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