Across the board, retailers posted significantly better-than-expected advances in same-store sales in January, with the cold weather helping the index record its biggest advance since September 2011.
Retail sales posted a better-than-expected gain during January, as the Same Store Sales Index registered a 5.8% jump over year-earlier levels. Although including the results from the drug store sector pushes that same-store sales growth rate down to 5%, that is well above the final estimates of 3.5% and 3.1% ex-drug stores, and marks the best performance for same-store sales since September 2011 when SSS jumped 5.6% (and 6.5% once drug store sales were factored out.) Only one sector, the Teen Apparel group, reported results that fell short of SSS expectations.
The nationwide cold snap during January helped retailers unload winter merchandise, such as coats and jackets. While department stores and apparel retailers were selling many of these items at a discount in order to clear their shelves ahead of the arrival of spring merchandise, those discounts weren’t as heavy as they would have been in a month’s time. That made the situation a win-win for both retailers and shoppers who, being hit by higher payroll taxes, remain highly bargain-conscious and reluctant to pay full price for anything.
The gains were a dramatic improvement from the index’s performance in January 2012, when SSS advanced only 2.8%, and 4.4% once drug store sales were removed from the equation. Excluding the drug stores, retailers on average posted 4.3% gain in same-store sales in 2012.
Among the month’s biggest winners were Kohl’s (KSS.N) and Stage Stores (SSI.N), both of which posted their strongest gains in years. Kohl’s recorded a 13.3% surge in SSS in January over year-earlier figures, and noted that this “allowed us to accomplish our goal of clearing seasonal merchandise”, leaving the retailer with a strong inventory position heading into its new fiscal year.
As expected, department stores were the strongest performers, with their 11.4% gain in SSS dwarfing the year-earlier 1.9% advance as well as the 5% estimated increase. Nordstrom (JWN.N) and Macy’s (M.N) were the leaders in the group, reporting that their same-store sales jumped 11.4% and 11.7%, respectively, for January. Despite intense competition in the discount sector, members of this group also fared better than expected, with same-store sales rising 3.5%, above the final estimate of 2.8%.
Many of the leaders and laggards are familiar names. Gap (GPS.N), which reversed its underperformance last year thanks to some savvy merchandising decisions and better inventory management, continued to post some of the biggest gains in SSS, with its 8% January increase being double the level that analysts had forecast. At the other end of the spectrum, teen apparel retailers remain a drag on the overall index. The sector as a whole saw SSS slump 3.7% in January, a larger decline than the 1.1% dip that analysts had anticipated. Wet Seal (WTSLA.O), one of the heaviest-weighted components in this group, as Gap is among the apparel retailers, reported a decline in SSS of 9.4%, more than three times the forecast decline of 2.3%. Even the fact that Zumiez (ZUMZ.O) managed to defy expectations and post a gain of 2.6% for January wasn’t enough to offset that negative performance.
Some of January’s outperformers also boosted their fourth-quarter earnings guidance, Macy’s among them. Those retailers that delivered disappointing same store sales, such as Cato Corp. (CATO.N) (which saw same-store sales plunge 12%, compared to analysts’ forecasts of a 1% increase), blamed the economic climate. “The timing of tax refunds and the effect of higher payroll taxes” were responsible for this shortfall, the company said in its press release. There is some reason for uncertainty looking forward, as recent surveys suggest that those households with an annual income below $75,000 are seeing their disposable income shrink as a result of the new tax burden. Clearly, retailers will be watching for signs that this is carrying over into consumer spending levels in general, and driving an even more intense focus on finding values and bargains among consumers who continue to head to the malls.
For the full report, please click here
• For more on analysts’ changing views of retail Sales, please watch this interview with analyst Jharonne Martis.
