Commentary: Downtick in February largely a temporary blip
After solid start to the year, retail is now back in softer growth territory. While the 2.1% rate of overall expansion is not disastrous, it is much lower than the past few quarters and is largely the result of higher gas prices which buoyed sales at gas stations by 15.8%. The pure retail number is more concerning, with the 0.8% increase being the slowest growth recorded since February 2013.
There is, however, some comfort to be taken in the fact that February 2013 is the last month in which growth was so anemic. In that year, the IRS delayed tax filing and refunds due to changes in the tax code. This mirrors this year’s various tax refund delays, something that has affected the amount households have to spend on retail. Back in 2013, retail sales growth bounced back in the months following February; a pattern we expect will be repeated over the coming reporting periods.
The other, albeit, smaller factor that needs to be accounted for is that 2016, the comparison against which this year’s figures are made, was a leap year. This is not accounted for in the non-seasonally adjusted figures and so dampened growth. The February 2013 figures also suffered from this impact as 2012 was a leap year.
Given all this, it is fair to say that the downtick in spending during February is not the result of structural factors or a downswing in consumer sentiment; it is largely a temporary blip. The evidence from our own sentiment tracker, and other indicators such as the labor market numbers, backs up this view: There is nothing to suggest that the consumer economy should be losing this much momentum.
The tax refund dynamic also shows up in where the declines are coming from: discretionary categories have suffered far more than non-discretionary. Electricals, a product category many people indulge in when spending their refunds, has recorded a year-over-year sales decline of almost 10%.
As much as this softening of retail numbers is temporary, it would be imprudent not to recognize that there are some underlying pressures on retail that may take some of the edge of growth over the coming months.
The rise in fuel prices is foremost among these. Although there are now signs that pump prices are moderating and may start to fall as spring approaches, there is no doubt that consumers are paying more to fill up their vehicles – something that puts a dint in the amount they can spend elsewhere.
Discounting levels are another feature of the market which will dampen growth. This is something that has affected apparel players for a time, and it is now starting to impact food retailers in a more significant way. All in all, it points to a year that will see reasonable growth, but one in which margins will be under pressure.
Neil Saunders is managing director of GlobalData Retail.
Christopher & Banks Q4 disappoints; to roll out merchandising changes
Changes are coming to Christopher & Banks Corp.
On the heels of a 7.8% decrease in its fourth quarter sales, the women’s apparel retailer is launching a new merchandising strategy that include a bigger focus on fashion over core items.
Christopher & Banks also will review styles on a weekly basis to identify emerging trends and mark down slower-moving products, said interim president and CEO Joel Waller on the company’s quarterly call with analysts.
The retailer’s net sales fell 10.1% to $85.0 million amid 499 stores, compared to $94.6 million in the year-ago period while operating some 534 stores.
The chain reported a loss of $17.2 million in the quarter, compared to a loss of $37.5 million in the year-ago period.
For the year, Christopher & Banks reported that its loss narrowed to $17.8 million, or 48 cents per share. Revenue was reported as $381.6 million.
“Given that we are making a number of changes in the business over the next several months and that enhancements to the merchandise assortment are not expected to be fully reflected until the third quarter, for the near term we will not be providing sales and EPS guidance,” Waller said in a prepared statement. “Overall, we believe that these strategic initiatives will strengthen our competitive positioning within the retail landscape and will drive improved and more consistent financial performance for our stakeholders over the long term, beginning in the second half of fiscal 2017.”
Penney losing key executive to Hershey
The chief marketing officer of J.C. Penney is leaving the company after two years on the job.
Mary Beth West is leaving the department store retailer on March 31 to become senior VP and chief growth officer of the Hershey Co. She will join Hershey on May 1.
West joined Penney in April 2015 after serving on the company’s board of directors for 10 years.
Prior to Penney, she spent 20 years at Mondelez International (previously Kraft Foods), including roles as its chief category & marketing officer and president of both its North American beverage and grocery businesses.
A search is underway for West's successor. In the interim, day-to-day marketing responsibilities will be overseen by Kirk Waidelich, senior VP-sales promotion and marketing, and Sheeba Philip, VP-marketing strategy and communications, according to AdAge.
West helped debut Penney’s campaign and tagline, "Get Your Penney's Worth" last spring, the report said. The chain updated the campaign for this year, adding a new line, "Priced to Buy, Guaranteed to Love."
“Mary Beth played an instrumental role in the company's return to profitability and was a key asset to the leadership team," Penney said in a statement. "However, she has decided to relocate to the Northeast where she and her family will be closer to relatives and she can pursue a new opportunity with one of the world's most iconic food brands. J.C. Penney is grateful for her dedication and service, and we wish her well in all future endeavors."