Lured by holiday-related promotions, fresh Spring merchandise and unseasonably warm weather, increasingly confident shoppers flocked to brick-and-mortar stores in February leading retailers to strong sales gains across the board.
Total net sales for the 19 chains that reported (Dillard’s no longer reports monthly sales and Walgreen and Rite Aid won’t report until next week) increased 8.3% from a year ago to $20.8 billion in February, while same-store sales rose 6.7% on top of a 5.0% gain last year – this was the 30th straight monthly rise after 12 consecutive months of declines and the best gain since September.
15 of the 19 chains reported comp gains for the month compared to 16 last February, with 81% of chains beating analyst estimates. Total trailing 12-month sales increased 7.6% to $287.7 billion and comparable store sales rose 5.9% following a 4.9% increase in the prior-year period.
A lack of winter storms and national temperatures above their long-term average for 11 straight weeks have helped drive foot traffic to stores, and much of the business during the month was event-driven – Super Bowl, Valentine’s Day and President’s Day. Early Spring merchandise roll-outs, highlighted by colored denim and clothes featuring bright colors or floral designs, have been well received so far.
Some of the best performers last month were the usual suspects – Costco (+8%), off-price stores TJX (+9%) & Ross Stores (9%), The Buckle (+14.8%), Limited Brands (+8%), upscale chains Nordstrom (+10.2%) and Saks, (+6.6%) and Zumiez (+14.2%) – all once again beat estimates and continued the momentum coming off a strong fiscal 2011.
There were a handful of surprises:
Target (+7.0%), which saw its sales & comps rise by the most in 10 months – CEO Gregg Steinhafel said “February sales were well above our expectations, due to stronger-than-expected guest traffic combined with a solid increase in transaction size,” However, we shouldn’t expect the same outsized result over the next two months – he added “We’re very pleased with the pace of our sales since the holiday season, though we continue to plan for a first-quarter comparable-store sales increase of around 4 percent.”
Gap (+4%), who has now seen sales shrink in 6 of the past 7 years and struggled to find fashions that resonated with consumers all last year, posted it’s best gain in 9 months. CEO Glenn Murphy said “We’re pleased we delivered positive comps across our North America businesses during February and that customers responded well to our spring product,” However, International comps were down 9% on top of a 7% drop last year, especially notable because the company expects international expansion to help revive its prospects.
On the other hand, Kohl’s (-0.8%) underwhelmed again coming off a holiday season that saw comps fall 2.1%. Along with JC Penney, Kohl’s is getting squeezed by the likes of Macy’s (+4.6%) & Bloomingdale’s on the high-end and names such as Target, Walmart and off-price stores on the low-end. Though JCP no longer reports monthly sales, the company said on its fourth quarter conference call that sales were down for the month following a holiday season which saw sales and comps decline 4.8% and 1.6% respectively, with steep margin contraction.
click on company below for detailed monthly performance data
| February Chain Store Sales Scorecard | Same-Store Sales Chg | |||||
| Company/Segment | Sales (1,000′s) | YoY Chg | Feb-12 | Feb-11 | TTM-12 | TTM-11 |
| Bon-Ton | $ 199,400 | 0.9% | 0.7% | -0.5% | -2.6% | 1.1% |
| The Buckle | $ 86,700 | 17.3% | 14.8% | 2.1% | 9.5% | 1.2% |
| Cato | $ 83,900 | -2.7% | -5.0% | 5.0% | -1.6% | 3.7% |
| Costco | $ 7,040,000 | 10.3% | 8.0% | 8.0% | 10.5% | 7.5% |
| excluding gas & f/x | 7.0% | 5.0% | 7.2% | 4.5% | ||
| Duckwall-ALCO | $ 36,500 | 3.4% | 1.1% | 3.1% | 3.0% | -1.8% |
| Fred’s | $ 159,100 | 3.6% | -0.7% | 0.9% | 0.4% | 2.0% |
| Gap | $ 874,000 | 6.5% | 4.0% | -3.0% | -2.5% | 1.7% |
| Gap North Am | 1.0% | -1.0% | -3.8% | 0.5% | ||
| Banana Republic NA | 12.0% | -4.0% | 0.2% | 2.9% | ||
| Old Navy NA | 5.0% | -4.0% | -2.5% | 2.4% | ||
| International | -9.0% | -7.0% | -7.2% | 1.5% | ||
| Kohl’s | $ 1,173,000 | 1.0% | -0.8% | 5.0% | 0.4% | 4.9% |
| Limited Brands | $ 653,900 | -2.5% | 8.0% | 12.0% | 9.6% | 9.8% |
| Bath & Body Works | 7.0% | 10.0% | 6.0% | 5.3% | ||
| Victoria’s Secret | 10.0% | 15.0% | 13.6% | 14.2% | ||
| VS Direct | 5.0% | 2.0% | 4.1% | 8.4% | ||
| La Senza | 1.0% | -3.0% | -2.2% | -1.1% | ||
| Macy’s | $ 1,860,000 | 5.5% | 4.6% | 5.8% | 5.3% | 4.8% |
| E-Commerce | 31.3% | 30.9% | 39.4% | 28.1% | ||
| Nordstrom | $ 704,000 | 16.2% | 10.2% | 7.3% | 7.0% | 7.5% |
| Full-Line & Direct | 11.9% | 9.6% | 7.8% | 8.8% | ||
| Rack Stores | 5.9% | 1.6% | 3.7% | 0.9% | ||
| Ross Stores | $ 677,000 | 13.8% | 9.0% | 3.0% | 5.6% | 4.9% |
| Saks | $ 207,900 | 6.0% | 6.6% | 15.3% | 9.1% | 7.4% |
| Stage Stores | $ 100,500 | 7.1% | 3.7% | -7.2% | 1.4% | 0.1% |
| Stein Mart | $ 80,700 | 0.4% | 0.7% | 8.2% | -1.5% | -0.4% |
| Target | $ 5,132,000 | 8.0% | 7.0% | 1.8% | 3.6% | 2.2% |
| TJX | $ 1,640,000 | 12.3% | 9.0% | 3.0% | 4.4% | 3.2% |
| Wet Seal | $ 46,700 | -3.1% | -5.8% | 7.0% | 0.7% | 0.5% |
| Wet Seal | $ 40,500 | -0.5% | -4.3% | 7.6% | 1.6% | 0.5% |
| Arden B | $ 6,200 | -16.8% | -14.3% | 3.0% | -4.6% | 0.4% |
| Zumiez | $ 40,200 | 22.9% | 14.2% | 12.8% | 9.0% | 12.2% |
| Total Stores | $ 20,795,500 | 8.3% | 6.7% | 5.0% | 5.9% | 4.9% |
Consumer confidence indices are approaching levels not seen since before the recession on an improving job market, stock market and household balance sheets. We have seen this movie before – spending was strong last year heading into spring and gas prices started to spike, effectively killing what was expected to be the start of a strong recovery. Well, prices at the pump have jumped nearly 50 cents just since Christmas and are already tracking 10% higher than last year.
One research firm already sees is already seeing a sharp slowdown in discretionary spending over the past few weeks. Bloomberg economist Joe Brusuelas says “Right now it does appear that stabilization in the labor market and rising share prices of equities are partially offsetting rising gasoline prices,” However, he added that if prices continue to rise at the pump, consumer confidence (which has a strong inverse correlation with gasoline prices) “will likely deteriorate.”
We are also somewhat concerned about margins – although holiday sales were better than expected, we saw margin contraction across the spectrum in the fourth quarter driven by a combination of higher input costs and heavy promotional activity, especially in winter-related product categories due to the warm weather. Though cotton and other commodity costs have come down, retailers still face a lot of pricing pressure. Though we never tire of hearing “leveraging expenses” and “inventory management,” sacrificing margins for sales will eventually take their toll on the bottom line.
January and February are typically the lightest-volume months of the year, so we are anxious to see how the consumer holds up over the next few months – because of the timing of Easter (about two weeks earlier this year than last year) and related promotional activity, we will focus on the combined March-April period as opposed to either month individually.
