January Retail Gains Wrap Up Stronger Holiday Season, but Analysts Warn of Regression

Holiday gift card redemptions, ultra-lean inventories and a somewhat-rejuvenated consumer propelled January 2010 over easy comparisons in the year-ago period, when sales had plummeted 4.8% in the face of an impending economic freefall. As a result, the market effectively wrapped up what was the strongest Holiday sales period since 2006. January, which is traditionally the lightest contributing month to overall holiday retail sales and a key liquidation period, helped drive the Holiday period to better than 2% growth on a year-over-year basis.

Also driving consolidated comps in January was surprising strength from mall-based retailers and luxury chains, the latter of which benefited from the welcomed return of the high-end customer, who — for the moment, at least — is looking to upgrade his or her wardrobe following a year of conservative spending. 

According to the International Council of Shopping Centers, which tracks 31 retail chain stores, excluding Walmart, aggregated comps for the apparel-chain-store segment grew 6.4% (vs. -14.0% in January 2009), which marked the strongest monthly gain for that segment since March 2007 (+7.0%).

The Department Store group posted a 2.9% consolidated comp for the month, while the Luxury segment jumped an impressive 10.9%.  Despite notable strength from Nordstrom (+14.0%) and Macyfs (+3.4%) — both of which easily bested estimates — analysts warned that much of the growth could be due to gbinge shoppersh and would not translate to fourth quarter results. The luxury segment also continued to ride strength from Saks (+7.0%), which garnered vigor from menfs shoes, handbags and designer clothes, and Neiman Marcus (+6.8%).                     

Nordstrom outpaced most estimates by at least ten percentage points, with much of the gain coming in the back-half of the month on categories including womenfs shoes, junior womenfs apparel and handbags. The retailer saw particularly strong response to the introduction on more moderately-priced opening price-point product. Kohlfs (+6.5%) continued to fare well, outpacing Wall Streetfs estimates yet again, while JC Penney (-4.6%) turned in a disappointing month as  weakness in childrenfs merchandise offset strong returns from womenfs merchandise and jewelry. Stage Stores (-11.3%) also missed estimates, with president and CEO Andy Hall noting that lower clearance inventory and inclement weather dampened sales for the January.

The majority of the luxury and mall-based results were inflated by dismal January 2009 figures.

The Apparel Chain sector saw 6.4% growth. Abercrombie & Fitch posted 8.0% growth to put an emphatic end to a string of double-digit down months that stretched back to April of 2008. ANF noted that gift card promotions and winter clearance events boosted sales for the company, which also saw comps for its Hollister brand improve mid-singles after several months of double-digit weakness. Sales werenft so rosy for Hot Topic (-13.1%), which has now missed estimates for three straight months. Management for the alternative clothing retailer said slowing sales of the gTwilighth series merchandise has caused clothing sales to stem.

 

At Wet Seal (-3.7%), management said favorable merchandise margins and careful inventory and promotion management had prompted the retailer to slightly raise Q4 earnings estimates despite missing January comps forecasts. Other notables within the teen segment include The Buckle (-1.4%), which reported its first comp decline in more than two years on harsh winter weather and fewer promotions, and value-driven Aeropostale (+6.0%), which narrowly outpaced analystsf predictions and subsequently raised projected Q4 EPS to between $1.41 and $1.42 a share from previous guidance between $1.33 and $1.34 a share.
For Discounters, which rose 2.9% as a group, The TJX Cos. (+12.0%) maintained strength in January, as president and CEO Carol Meyrowitz noted that accelerating customer traffic and significant strength from The Marmaxx Group (13%), which includes TJ Maxx and Marshallfs, had fueled growth for the month. TJX subsequently raised guidance for the fourth quarter. High-end discounter Target (+0.5%) disappointed for the quarter, posting smaller-than-expected growth on limited opportunities from fewer clearance sales. Ross Stores (+8.0%) beat estimates in route to reporting its eleventh straight month of comps growth.

At warehouse clubs, price inflation of food and gasoline provided a boost to Costco (+8.0%) and BJfs Wholesale Club (+8.4%) as each outpaced analystsf predictions. BJfs noted that a calendar shift due to the timing of the Super Bowl had hindered comparisons in the back-end of the month, but added that strong categories for the month included apparel, cigarettes, housewares, food, and small appliances, among others, while automotive and tools, sporting goods, and TVs were soft for the month compared to last year.

Despite general strength throughout the market, analysts warned that market players should temper expectations for Q4 and beyond. Recent overspending by consumers — particularly the high-end shopper — will likely taper off as year-end bonuses and Christmas money dwindles — evidenced by a 2% drop in the Standard and Poor’s retail index.
ICSC Research reaffirmed its 2010 comp store projection of growth of 3.0% to 3.5% for the U.S. market, which would be the strongest since 2006 (+4.8%) and compares with a 1.9% drop in 2009 (which was on top of a 1.1% dip in 2008).  Looking ahead to February, ICSC Research anticipates that sales will be up about 2% as easy year;sago comparisons continue.

 

The Buckle reported January comps dipped 1.2% on net sales that slipped 4.4% to $50.1 million for the four-week fiscal month from $50.2 million a year ago.

Mens sales, which represented 37.5% of total sales, were down about 2.5% despite strength from denim, outerwear and footwear.  Womens sales were up approximately 9.5% on strength from denim, woven tops, sweaters, outerwear, accessories, active apparel and footwear.  Overall price points were up approximately 7% for the month.

 

Zumiez Inc. reported comps for the four-week period ended Jan. 30 increased 1.8% on net sales that increased 9.2% to approximately $22.1 million from $20.3 million a year ago.

Weekly comps were positive 5.4%, positive 0.7%, negative 1.1% and positive 2.6% for weeks one through four, respectively. On a pre-recorded call, company CFO Trevor Lang said dollars per transaction were flat due to a decrease in average unit retail, which was offset by an increase in units per transaction.