Retailers barely meet sales expectations Gains by discounters, specialty chains offset department store woes

Marketplace

December 04, 1998|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Consumers hunted bargains in the nation's stores in November, favoring discounters and specialty chains over department stores, and leaving winter apparel untouched on the racks amid spring-like weather throughout much of the nation.

The nation's biggest retailers, which reported November sales yesterday, just barely met expectations, as gains at Wal-Mart Stores Inc. and Gap Inc. helped offset sharp declines at department store chains such as Sears, Roebuck and Co.

"The department stores have taken a bloodbath," said Kurt Barnard, president of Barnard's Retail Trend Report in Upper Montclair, N.J. "The discount stores are doing quite well and thriving at the expense of the department stores.

"Part of the reason for the shortfall has been the weather. You don't want to buy sweaters and ski pants when the temperature is near 70, and there isn't any snow around."

Department stores, in particular, suffered from warm weather because of a heavy reliance on apparel, said Kenneth Gassman, retail analyst with Richmond, Va.-based Davenport & Co. Apparel often accounts for at least 70 percent of the merchandise mix at a department store, but only about 40 percent to 50 percent at a discount chain, he said.

But the weather only added to problems the department stores have experienced for several months, as they have lost sales to discount and specialty stores that have improved service and selection, while offering lower prices, analysts said.

"Consumers are bargain hunting," Gassman said. "The discounters are showing strong gains, and everyone else is being left in the dust."

Specialty stores, meanwhile, have taken the lead in introducing emerging brands or developing and popularizing private label brands, such as Abercrombie & Fitch, said Kelly Armstrong, an equity analyst with Wheat First Union in Richmond.

As for the department stores' slowdown, "I think it's just a lack of newness in the merchandise," she said.

According to the Bloomberg composite same-store sales index of 23 national retailers, sales rose 4.12 percent in November, with department store sales off by 0.19 percent.

"It is below what we expected," said Barnard, who had expected increases in the 5 percent range.

But a broader index of more than 50 retailers, compiled by Wheat First Union, showed sales up by 5.1 percent, and in line with expectations, Armstrong said.

Sears reported a 3.6 percent decline, while Dillard Inc. saw sales fall 4 percent. Federated Department Stores Inc., which operates Bloomingdale's and Macy's, reported even sales with last November's, while May Department Stores Co., owner of Hecht's and Lord & Taylor, saw sales inch up 0.1 percent.

The Bloomberg index showed a boost in sales for many of the discounters, with a 5.67 average gain, led by Ames Department Stores Inc., with a 10 percent same-store increase, and Wal-Mart, with a 7.6 percent rise.

Even Kmart Corp., which saw same-store sales rise 2.5 percent, said November fell below expectations "due to continued warm weather, which slowed sales of seasonal apparel," said Floyd Hall, Kmart's chairman.

Sales jumped 8.38 percent for specialty and apparel retailers, such as Gap Inc., with a 16 percent gain driven by its Old Navy division, and the Limited Inc., with an 8 percent gain, according to the index. Sales climbed 24 percent at American Eagle Outfitters.

Despite the November results, Davenport analyst Gassman revised his holiday sales forecast upward yesterday, raising it to a 3 percent to 4 percent gain, from an initial forecast of a 2 percent to 3 percent increase. "It had to do with the [Federal Reserve] reducing interest rates and dumping money into the economy, and a recovery in the stock market, which has restored investors' retirement portfolios to more normal levels," Gassman said.

Monthly retail sales

..................... ....... Monthly ....... ......... .... YTD

........ ........ Monthly ... same-store ..... YTD ....... same-store

Company ......... sales* .... pct. change .... sales* .... pct. change

Dayton Hudson .. $2,706 ..... +3.0 ........... $22,818 ... +4.5

The Gap .......... $868 .... +16.0 ............ $6,893 ...+16.0

J. C. Penney ... $2,919 ..... +4.9 ........... $24,211 ... -0.8

Kmart .......... $2,902 ..... +2.5............ $26,175.... +4.6

Kohl's Corp....... $422.4.... +3.2 ............ $2,814.6 . +7.9

The Limited....... $842.2.... +8.0............. $6,933.... +6.0

Lowe's ........... $946.1 ... +6.9............ $10,275.... +5.3

May Dept. Stores $1,239.1 ... +0.1............. $9,809.2 . +3.2

Sears .......... $3,488 ..... -3.6 ........... $28,855.... +1.7

Wal-Mart ...... $12,119 ..... +7.6 .......... $109,026 ... +8.8

*In millions

Pub Date: 12/04/98

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