FINANCE

Macy’s and Nordstrom top estimates in December; Kohl’s misses

BY Katherine Boccaccio

New York — As cash-strapped consumers curtailed holiday spending, department store retailers felt the pinch and some performed better than others in an uncertain environment. The strongest performances were turned in by Macy’s and Nordstrom, both topping estimates.

Overall, analysts looked for 3.3% same-store sales growth for December across 17 chains, down from 4.2% growth in December 2011, according to Thomson Reuters.

Macy’s reported a rise in December same-store sales of 4.1%, edging Wall Street’s expected 4% rise, and a total monthly sales gain of 3.6% to $5.102 billion. But the department store heavy-hitter cuts its guidance for the fourth quarter and detailed a series of “normal-course adjustments” to its store portfolio that include closing six underperforming stores. The chain will open nine other Macy’s and Bloomingdale’s around the country to rebuild its total store count.

CEO Terry Lundgren said the rate of comp growth was less than the retailer expected, but that was due partly to uncertain economic news and the lingering effects of Superstorm Sandy.

“Last month was our fourth consecutive December with same-store sales growth, which is indicative of the sustainability of our key business strategies,” said Lundgren. “While the rate of growth was somewhat less than we had expected in the first two months of the fourth quarter, it came amid some significant headwinds from uncertain economic news and the lingering effects of Hurricane Sandy.”

Kohl’s Corp. saw same-store sales rise 3.4% in December, along with a total sales increase of 4%, falling below company expectations. “December sales were lower than planned,” said CEO Kevin Mansell. “Additionally, sales came late in the holiday shopping season and, as a result, were at deeper discounts than planned. We are taking the necessary markdowns in the fourth quarter to manage our inventory as we transition into the spring season.”

Among other department stores reporting:

• Nordstrom recorded an 8.6% rise in December same-store sales, beating the 3.6% estimate; and
• Bon-Ton Stores grew 2.4%.

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FINANCE

Last-minute surge helps fuel December sales; Gap shines in apparel sector

BY Katherine Boccaccio

New York — An apparel last-minute surge in holiday shopping helped many key retailers report better-than-expected sales in December. Twenty retailers reported sales in December rose an average of 4.5%, compared with the year-ago period, according to the International Council of Shopping Centers. Costco, Gap, Nordstrom and TJX Cos. were among the best performers.

Overall, Wall Street expected 3.3% overall same-store sales growth for December across the 17 chains that still report monthly comps, down from 4.2% growth in the year-ago period, according to Thomson Reuters. Same-store sales rose a disappointing 1.6% in November.

The holiday season was never expected to be a barn-burner, but “fiscal cliff” headlines, Superstorm Sandy damages and the Sandy Hook tragedy created additional pressure as consumers reacted to the onslaught of bad news.

"The consumers’ confidence is off a bit, and I don’t think you can point to a single individual thing,” Madison Riley, managing director of retail consulting firm Kurt Salmon, told Reuters. “It’s a culmination of things that hit their psyche."

In the specialty apparel category, Limited Brands missed Wall Street’s 4.5% forecasted increase by reporting a 3% rise in December same-store sales. The parent of Victoria’s Secret, Bath & Body Works and namesake stores reported net sales of $1.947 billion for the five weeks ended Dec. 29, 2012, compared with net sales of $1.868 billion last year.

Gap Inc. beat estimates with a 5% rise in December same-store sales, ahead of the 3.5% expected rise. Total sales for the five-week period ended Dec. 29 rose to $2.08 billion from $1.98 billion.

“Customers responded favorably to our product offerings and promotions during the holiday season overall,” said Glenn Murphy, chairman and CEO.

By brand, Gap North America delivered a positive 2% vs. negative 4% last year; Banana Republic North America delivered positive 1% vs. negative 2% last year; and Old Navy North America delivered positive 13% versus negative 4% last year.

One of the weakest performances in the apparel category was turned by the struggling The Wet Seal, whose same-store sales plummeted 9.7%. Analysts forecast the chain would have the weakest sales of any of the 17 chains reporting, but only expected a 5% decline.

In a statement, the retailer said: “December sales were below our expectations, driven mainly by lower than expected transactions throughout the month.”

Among other reporting specialty apparel retailers:

• Zumiez same-store sales in December surged 15%;
• The Buckle edged up 1%;
• Stage Stores rose 2.7%;
• Hot Topic gained 4%; and
• Cato dropped 7% and lowered its fourth quarter guidance.

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B.Mcdermott says:
Feb-07-2013 05:28 pm

Could be because of stringent forecast
I think most of the retailers now predict the sales forecast with much caution and stringent rules because of which often the "actual" sale exceeds the predicted forecast. - Victorias Secret Fan page

B.Mcdermott says:
Feb-07-2013 05:28 pm

I think most of the retailers now predict the sales forecast with much caution and stringent rules because of which often the "actual" sale exceeds the predicted forecast. - Victorias Secret Fan page

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REAL ESTATE

The Value Matrix

BY Jeff Green

At a time of year when much of the retail news we hear focuses on receipts and holiday sales performance, I can’t help thinking that the notion of value has become synonymous with price — and only price. You can make the argument that price has nearly hijacked the whole definition of value. Why is that, exactly? Should retailers be paying closer and more systematic attention to how they articulate (and how customers perceive) the value of their brand?

From my perspective, there are six key factors in the value equation. Actually, I see it as less of a straight-line equation and more of a “matrix”, with different retailers occupying their own strategic space based on their individual combination of strengths. While price is undeniably a big factor, there is also selection, quality, service, and convenience, as well as a category I refer to as “social consciousness”, which encompasses everything from environmental responsibility and charitable giving, to how you treat your employees.

Once we start thinking about retail value in these concrete terms, it’s not hard to see where certain chains fit in. Wal-Mart, Target, Costco, and many on-line retailers are known for their low prices; selection is a traditional strength of “category killers” like Dicks Sporting Goods and Best Buy; quality is the obvious selling point of luxury brands like Tiffany & Co. and Saks Fifth Avenue; Nordstrom has long taken pride in its high level of service; and convenience, while largely a location-specific trait, is definitely a plus for traditional supermarkets, fast food restaurants and pharmacies. Social responsibility, meanwhile, represents value for locally sourced operators such as Chipotle, stores specializing in natural products, such as Whole Foods, and local independents.

Many retailers boast more than one of these factors, of course, but, in the same way that certain key value metrics can help pin down a particular brand, this perspective clarifies what they are not. It’s not an especially controversial observation to point out that while Nordstrom does service quite well (and perhaps quality and selection), price and convenience are not traditional brand selling points. The lines, though, are not always black and white. Is Wal-Mart a socially conscious operator for its forward-thinking sustainability initiatives? Or is it seen as a pariah for maintaining a low wage scale with skimpy benefits package for its employees?

This all leads to the fundamental question: What can retailers do with this framework? At its most basic level, it’s about branding. Ultimately, who you are as a brand rests on how you express value to consumers — and where you fall on the value matrix is a huge part of your brand. But I also think that viewing the success, failure, and evolution of different brands though this more nuanced and expansive definition of value sheds some light on why some retailers have thrived, others have failed, and why evolving as a brand and changing consumer perceptions can be such a challenge.

The failure of some brands can be tied to a lack of any defining niche on the value matrix (K-Mart hasn’t recently excelled in any one specific area, for example). When you are not clear about where you fall on the matrix, you risk confusing the customer. I worry that Sears is one prominent brand suffering from an inability to define itself on the value matrix. That same issue of consumer uncertainty also makes it tough to change, and a real challenge to re-establish yourself at a different place on the matrix — as J.C. Penney is discovering. While J.C. Penney is incorporating more trend-forward brands (Sephora, Buffalo Jeans, Mango) and has undergone a comprehensive reworking of its brand identity, the future is still far from certain. Change can happen, of course, but it often takes time. Macy’s, for example, has gradually shifted from a quality proposition to a place on the matrix where it is known more for its great deals and wide selection. Change can also be more of an organic process (as in the case of Starbucks, where the brand is no longer defined quite so much by quality as by convenience).

So, while price will always be part of the equation, I believe it’s critical for brands to not let dollar signs overshadow other essential value components. Successful brands look beyond price to focus on the areas of the matrix where they connect with their target customers. Consumer behavior and customer loyalties make it clear that successful branding is about specializing: One size clearly does not fit all.

We’d love to hear your thoughts through a comment below or you can contact me directly at [email protected].


Click here for past columns by Jeff Green.

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