March 28, 2024

Back-to-School Shopping Buoys Many Retailers

Sales at stores open at least a year rose 4.4 percent on average from August 2010, according to a Thomson Reuters tally of 23 retailers. That was 0.2 percentage points below what analysts had expected, but still a strong result.

“It bodes well for the balance of the year — the consumer has shaken off the craziness of Wall Street and the negativity coming out of Washington, and they’re buying,” said Madison Riley, managing director at Kurt Salmon, a retail consulting firm.

The companies with the biggest increases represented pretty much every retailing sector. BJ’s Wholesale and Costco, both warehouse stores, posted same-store sales increases of 11.5 percent and 11 percent. Limited, a consistently good performer because of its Victoria’s Secret division, was also up 11 percent. The teenage-oriented store chain the Buckle was up 8.3 percent, while Nordstrom rose 6.7 percent.

All five were also the biggest upside surprises, beating analyst estimates by the biggest margins among the stores reporting.

On the downside, Kohl’s and J. C. Penney, which have been heavily promoting back-to-school shopping, continued to have sales trouble. Both retailers posted same-store sales declines of 1.9 percent. Analysts had expected increases of 1.6 percent and 0.8 percent, respectively.

Earlier in the summer, analysts were predicting that back-to-school shoppers would postpone purchases until September as they waited for deals. But at most retailers, that did not seem to be the case.

“Part of the dynamic we see here is consumers had held off on a fair amount of spending in the last 18 months due to the economic situation. It’s pent-up demand, and it’s an important part of the retail year,” Mr. Riley said. “I don’t think they’ve put it off; I think they’ve gone ahead.”

MasterCard Advisors’ SpendingPulse, which tracks spending at the retail level, said sales in back-to-school categories increased 3 percent in both July and August. “This is the best back-to-school season we’ve seen in terms of growth since 2006,” said Michael McNamara, vice president for research and analysis for SpendingPulse.

While luxury spending is usually correlated with the stock market over the long term, that is not always the case over the short term, as August showed.

In addition to Nordstrom’s gain, Saks Fifth Avenue’s same-store sales rose 6.1 percent. SpendingPulse did not release a percentage increase for luxury spending this month because of changes in how it reports data, but “the luxury trend throughout the summer has been one of the leading areas, and it continues to be through August,” Mr. McNamara said.

Still, analysts said that some lower-end stores have raised prices because of increases in cotton and other materials, but are having trouble getting shoppers to pay more.

“Thus far in the season, promotions appear to be deeper than last year, and inventory levels across the sector are growing faster than sales, which bodes poorly for successful price increases,” Adrienne Tennant, an analyst at Janney Capital Markets who covers apparel stores, wrote in a note to clients this week.

Hurricane Irene, which caused stores to close and shoppers to stay at home along the East Coast last weekend, seemed to have a light impact on sales. The retailers that quantified the impact of Irene on same-store sales said it had hurt sales by 0.6 percent (J. C. Penney) to 1.5 percent (Macy’s and Saks).

The more significant impact of Irene will be felt next month, Paul Lejuez, an analyst with Nomura Securities, said in a note to clients, because the beginning of this week, including Sunday, when many of the stores were closed, will be counted as part of the next period’s results.

At Costco, several warehouses closed briefly over the hurricane weekend, but “we saw a lift in sales prior to the weekend as members anticipated the storm,” a Costco spokesman said in a recorded message. Over all, the net effect of Irene was slightly negative, Costco said.

Costco also said Thursday that its longtime chief executive and one of its founders, Jim Sinegal, would resign on Jan. 1. He will be succeeded by Craig Jelinek, who is Costco’s president and chief operating officer. Mr. Sinegal will continue as a board member.

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A Robust Rise in April’s Retail Sales Comes With a Hint of Concern

Sales at stores open at least a year, a measure of retail buoyancy known as same-store sales, increased 8.9 percent on average in April, according to Thomson Reuters’ tracking of 25 retailers. That was one of the biggest increases in the last few years, and it topped analyst expectations of 8.2 percent.

Chris Donnelly, a senior executive in the retail practice at Accenture, said the results were good but no one should get carried away.

“It was expected to be a big jump — if you look at analyst expectations, and even the companies’ own expectations,” he said, “and frankly, some companies didn’t jump as much as they were expected to do.”

Even so, the companies that missed forecasts by the biggest margin — Kohl’s, Saks Fifth Avenue and J. C. Penney — still posted good results. Kohl’s same-store sales increased 10.2 percent, compared with analyst estimates of 15.1 percent. Sales at Saks rose 5.8 percent, compared with estimates of 10.3 percent. And J. C. Penney increased 6.4 percent; analysts had expected 8.5 percent.

“Everyone’s pretty happy that April turned out so well, but looking forward, there’s still a lot of concern,” Mr. Donnelly said, noting that gasoline prices and raw material costs are rising sharply.

Gasoline prices are up about 30 percent so far this year — close to an average of $4 a gallon — and retailers are trying to figure out the impact if prices stay there or continue to rise. Higher gas prices tend to affect traffic at physical stores.

“When the national average price of gasoline exceeds $3.20 a gallon, that’s when we start to see indications of change,” said Michael McNamara, vice president for research and analysis at SpendingPulse, which also tracks gas sales. “People pump fewer gallons, and drive less, and that tends to have impact on retail because people cut back on Saturday driving.”

Stage Stores, which reported results on Thursday, said its first-quarter sales increase of just 0.2 percent was damped by gas prices.

“Rising gas prices made for a more cautious consumer,” Andy Hall, president and chief executive, said in a statement.

Last week, Wal-Mart’s chief executive, Michael T. Duke, issued the same warning. “There’s no doubt that rising fuel prices are having an impact on our customers,” Mr. Duke said at an event in New York. “There’s more pressure.” The sharp drop in oil prices over the last four days has not yet begun to affect prices at the gasoline pump, but if sustained, it could provide relief.

Three of the midrange department stores reporting sales on Thursday had some of the best results, with Macy’s, Dillard’s and Kohl’s all posting increases of same-store sales between 10.2 and 11 percent.

The companies attributed the increase in large part to Easter coming in late April, as opposed to last year when most of the Easter-related shopping occurred in March.

Even so, comparing combined March and April results from this year to last year, the stores were improving. Dillard’s, for instance, said its combined March and April same-store sales were up 4 percent over 2010, and Macy’s said the combined months’ results were up 5.3 percent this year over last.

Limited Brands had an increase of 20 percent for all its brands, bolstered by a 25 percent increase at its Victoria’s Secret unit. Analysts had expected a 12.2 percent increase for Limited over all, and a 16.3 percent increase at Victoria’s Secret.

The Limited said in a recorded message that pretty much everything at Victoria’s Secret was performing well, from yoga shorts to new packaging for its fragrances. It also increased its earnings guidance for the second quarter, to 37 to 39 cents a share, up from its previous guidance of 26 to 31 cents a share.

Gap Inc. had one of the most surprising results.

Gap’s sales have been faltering so badly that when Thomson Reuters reports same-store sales for the apparel category, it also includes a number that excludes Gap, to more accurately reflect where the majority of stores are. On Thursday, Gap Inc. announced that it had dismissed its head designer for the Gap brand, Patrick Robinson. Three months ago, it dismissed the Gap brand’s top business-side executive.

In April, however, Gap posted an 8 percent increase in same-store sales in a month analysts had expected a 0.8 percent decrease. The Old Navy and Banana Republic divisions pushed that increase, rising by 14 and 11 percent respectively. But the Gap unit was also in positive territory for the first time in 2011, with an increase of 2 percent.

Spending in the apparel sector over all increased 10.4 percent in April as compared with April a year ago, according to MasterCard Advisors SpendingPulse, which estimates sales from cash, check and credit cards.

“Sectors like apparel had a significant Easter bump, and they are really inflating the growth rate,” Mr. McNamara of SpendingPulse said.

E-commerce sales were up 19.2 percent, according to SpendingPulse, the largest increase since July 2007. And luxury spending continued to be strong, increasing 9.6 percent.

High gas prices can be a boon for e-commerce sales, as customers save gas by having clothing shipped directly to their houses.

“Almost in conjunction with the lower pumping numbers, we’ve seen acceleration of the e-commerce growth,” Mr. McNamara said.

And while high gas prices affect discount stores’ customer base, they also means the stores might attract more affluent customers. Discount stores as a sector had the highest same-store sales increase in April, rising 12.1 percent, which was 1.3 percent higher than analysts had expected.

“It hurts the spending power of your folks, but at the same time a lot of people tend to trade down,” Mr. Donnelly said.

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