November same-store sales gave a boost to department stores and specialty operators that offered consumers the right fashion mix while unseasonable weather dragged sales down at other retailers.
Overall, November was a slight disappointment after October’s strong comps. Most retailers cited unseasonably warm weather as a drag on sales in the first weeks of the month, but promotions late in November helped drive traffic. Specifically, department stores benefited the most from promotions on Black Friday, and the weekend after Thanksgiving.
“Those retailers that had early bird promotions were the ones who got the customers, the early bird really got the worm,” said Christine Chen, retail analyst, Pacific Growth Equities. Stores that didn’t have a carrot to lure customers in didn’t get traffic over the weekend, she said.
Overall, U.S. chain store sales tracked by the International Council of Shopping Centers rose 2.1 percent for November. The luxury sector tracked by ICSC rose 5.1 percent and department stores grew 4.6 percent. “Retailers cited three reasons for the results: tough comparisons with hurricane-induced replacement demand in the South, pockets of mild weather that curbed seasonal apparel demand and lower gasoline prices (relative to last year) that cut into wholesale clubs that report gasoline sales,” said Michael Niemira, ICSC’s chief economist and director of research.
Of the 47 retailers tracked by WWD, 28 had gains, two companies reported flat same-store sales and 17 experienced declines. Sales for the mass merchant sector were up 2.4 percent on average while specialty retailers had an average gain of 1.9 percent, and department stores rose 1.5 percent. Despite its lower sector average, the department store channel was still a standout, according to industry observers, because Bon-Ton Stores’ 10.5 percent comp decline dragged down the average.
“Black Friday is really about the department stores,” Chen said.
Appealing fashion and promotions drove Saks Fifth Avenue same-store sales up 7.2 percent while comps at Federated Department Stores gained 8.5 percent over last year. Nordstrom and Neiman Marcus had comp gains of 5.4 percent and 2.9 percent, respectively. Aside from Bon-Ton, decliners in the department store channel included Dillard’s with a 3 percent decrease and Gottschalks with a 0.9 percent decline.
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Moderate department stores Kohl’s and J.C. Penney did well, reporting same-store sales gains of 3.7 and 1.4 percent, respectively.
Early bird promotions at department stores lured older consumers in particular, analysts said, at the expense of specialty retailers such as Chico’s FAS and Ann Taylor Stores that serve the same demographic. Both retailers fell short of expectations for November, posting comp declines of 0.4 and 4.3, respectively. But promotional activity did help other specialty retailers. Two standouts were American Eagle Outfitters and Guess.
American Eagle comps climbed 14 percent, slightly below industry forecasts, and Guess’ figures were up 12.1 percent. Both chains were already in a strong position coming out of the fall and back-to-school selling seasons, but weekend promotions helped draw even more traffic.
“We expect American Eagle to be one of the strongest retail performers this holiday season. American Eagle has a growing loyal following with teens and parents as well. It has become a destination shopping experience for several age groups. The assortment is fashion right, the company offers great incentives and the product is priced right,” said Jennifer Black of Jennifer Black & Associates, in a note.
Zumiez also did well in the early holiday season, posting a 12.1 percent same-store sales gain. The Limited’s Bath and Body Works and Victoria’s Secret banners turned in 16 and 14 percent gains, respectively. Abercrombie & Fitch, Hot Topic and Pacific Sunwear did not fare as well. Those companies posted declines of 3, 4.3, and 3.8 percent, respectively. Gap continued to struggle in November, reporting declines at all three of its banners. Same-store sales were off 1 percent at Banana Republic, 7 percent at Gap and 10 percent at Old Navy, according to the company.
“Overall, November was a challenging month as negative traffic trends persisted,” said Sabrina Simmons, senior vice president, corporate finance, at Gap Inc. “Promotional and markdown activities at Gap and Old Navy drove total company merchandise margins below last year, and we expect pressure on merchandise margins to continue into December.”
Specialty chains weren’t the only ones who found November to be a difficult month. Wal-Mart’s comps dropped 0.5 percent, the company’s first same-store sales decline in almost a decade.
“The home and apparel business is challenging and this will continue throughout the fourth quarter. While we were disappointed in these areas, we did see strong results in our home and apparel basics,” said Eduardo Castro-Wright, president and chief executive officer of Wal-Mart Stores in the U.S. In October the company said its move into fashion-forward apparel and renovations in U.S. stores had hurt comps. The company said it expects comp sales figures in December to be lower than initially predicted. Same-store sales are forecast in the range of flat to a 1 percent gain for December, Wal-Mart said.
Goldman Sachs questioned whether or not Wal-Mart is getting good returns on its store remodels, according to a research note from an equity analyst. The analyst said that figures for the last two months could make it difficult for Wal-Mart to meet its own fourth-quarter guidance projections.
Despite a weak performance by Wal-Mart, November wasn’t bleak for the entire mass channel. Target reported same- store sales gains of 5.9 percent. Costco, Stein Mart and TJX Cos. turned in sales gains of 4, 3.8 and 3 percent, respectively.
Regarding the holiday shopping season, most analysts said they still anticipate strong results, but November’s comps could make retail stocks wobble.
“November comps gave us more misses than hits, particularly after the surprising strength in October sales, which made November estimates more optimistic,” according to a note from CIBC World Markets. The firm said it still expects a strong holiday season, but predicts some potential volatility in retail stocks.
Analysts cautioned that the industry should not get too hung up on November sales figures, despite the positive impact of Black Friday. Statistically, only about 27 percent of holiday dollars are spent in November, Chen said. December still controls 50 percent of consumer holiday dollars, with January accounting for the remainder.
November is the official kickoff to the holiday season, but the softness seen in November can be made up the next month, ICSC’s Niemira said. He expects same-store sales for December to increase by 2.5 to 3 percent over last year.
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