Many retailers fall a bit short in December; Limited and Abercrombie shine in specialty sector
New York City — After coming off a strong November, U.S. retailers found their momentum largely waned in December, with sales impacted by a still-cautious consumer, early discounting and a blizzard that crippled the Northeast in the days immediately after Christmas. But while many chains missed Wall Street’s heightened expectations for December, the retail industry still turned in its strongest holiday performance since 2006.
The International Council of Shopping Centers said its index of December same-store sales rose 3.1% versus a year ago, short of the 3.5% rise expected by analysts.
The overall season was good, but the strength came from the beginning of the season," said Michael P. Niemira, chief economist, ICSC, in an Associated Press report. "This is kind of a wake-up call. It’s back to reality."
Thomson Reuters, which tracks same-store sales for a group of 28 national chains, said total sales for the group were expected to post a 3.4% increase in same-store sales for December, following a 5.6% bump in November.
Still, if retailers hit the 3.4% mark, it would be the best showing since December 2006, when same-store sales rose 4.7%.
Strong online sales, which many retailers don’t include in their monthly figures, also brightened the holiday spending picture as well. Consumers spent 13% more online this holiday season, ringing up a record $30.81 billion in spending, according to comScore.
On the apparel front, Limited reported a 5% rise in same-store sales, beating analysts’ expectations of a 4.6% gain, and Buckle, which recorded a 6.1% same-store sales gain, when a 4.5% gain was expected. Abercrombie & Fitch’s same-store sales soared 15%.
Among those that didn’t fare well in December was Gap, whose same-store sales dropped 3%, missing Wall Street expectations for a 2.6% gain. Net sales were flat at $2 billion.
By division, same-store sales at Gap North America stores fell 8%. At Old Navy North America stores the figure was down 2% International results declined 4%. The one bright spot was Banana Republic North America, where same-store sales edged up 1% in December.
American Eagle saw same-store sales plummet 11% and total sales fell 6%. Analysts expected a same-store sales decline of 1.7%.
In other apparel same-store results for December:
- Aeropostale same-store sales slid 5%.
- Urban Outfitters same-store sales were flat.
- Zumiez same-store sales rose 9.2%, but missed Wall Street expectations of an 11.5% gain.
Who is my eStore manager?
Coming out of a Macy’s store a man introduced himself as the store manager and thanked us for shopping at Macy’s. Driving back home my 7 year old daughter asked me: “Dad who is the store manager when you buy at home on your laptop?” Hmmm…never thought about that before.
I looked back thinking about the e-retailers that I have worked with and started searching for the person in the ecommerce organization who has the bottom line responsibility of website operations, sales and profitability goals and customer satisfaction:
- .com VP/president?
- Customer service manager?
- IT manager?
- Content manager?
- Marketing manager?
Everyone had a stake in the game but the question remained: Who is my eStore manager?
Store manager are measured based on the sales and profitability targets as well as customer satisfaction. To meet their objectives, store manager for brick-and-mortar store take responsibility for all store operations including customer satisfaction, sales and returns management, in-store marketing, inventory management, loss prevention and risk management.
Like brick-and-mortar stores; product, price and customer service still hold the paramount importance for the eStore. However, success of eStore is critically dependent upon few additional factors:
- Website availability: Your eStore is always available for business.
- Website performance: Response time which customers experience while on the eStore.
- Ease of navigation and product availability: Your eStore can carry "unlimited" products.
- Website scalability: Your eStore can accommodate huge number of customers while providing them with individual experience.
If you look carefully at what differentiates an eStore from a regular store you will notice a lot more IT system aspects that calls for a very diverse skill set in your eStore manager.
Majority of retailers continue to manage their e-commerce operations with separate business and IT teams similar to their bricks and mortar stores. This often results in a sub-optimal customer experience from retailers’ eStore, which is not consistent with the brick-and-mortar stores potentially hurting retailers brand image.
In our experience, setting up a dedicated eStore operations team can solve this problem.
The eStore manager — person leading the eStore operations team — should have the bottom line responsibility for successfully running the eStores and measured for the defined sales, profitability and customer experience and satisfaction metrics. The eStore manager should have the ability and organizational power to bring business and IT together to run the eStore.
Depending on organization’s maturity and culture one can chose to bring in a mix of Business and IT resources to the eStore operations team to provide an enriching experience to the customer.
The advantage of such an organization framework is:
- eStore operations becomes a specialized function and the team provides a good balance of resources combining business and IT functions.
- Running the eStore is a critical organization function. Your eStore is one of the largest stores in the organization with needs care 24×7 as your eStore is always open for business. Having dedicated focus allows quick turn around and better service to your customers.
Over last few years, online channel has grown in importance. There is a strong need and a business case to establish the dedicated eStore organization if online channel is part of long term strategy. Even the retailers who have identified the need are often struggling to setup the right organization structure.
Manish Lonial is a Principal in the Next Generation Commerce practice of Infosys Consulting. He can be reached at [email protected].
Akhilesh Srivastava is a senior principal in the retail, distribution and CPG practice of Infosys Consulting. He can be reached at [email protected].
Rain and snow deal club channel blow
Costco said its worldwide sales increased 11% to $9.19 billion for the five-week period ended Jan. 2 and total company same-store sales increased 6%. Same-store sales at Costco’s U.S. clubs increased 4%, or 3% if the effect of higher year-over-year fuel prices is excluded. Internationally, same-store sales increased 12%, but that figure was aided by currency exchange rates. Excluding the impact of exchange rates, international same-store sales increased 8%.
The total company comp was essentially inline with analysts’ consensus estimate of 6.1%, however, the 3% U.S. gain was lighter than the 3.9% consensus figure. The company’s results were thought to be negatively affected by wetter than normal weather in Southern California where Costco has a large concentration of clubs.
Conversely, severe winter weather that hit the Northeast late in December negatively affected BJ’s sales as it has a high concentration of clubs along the Atlantic seaboard. Same-store sales in December increased 3.8%, or 1.4% excluding the impact of escalating gas prices. The company said sales during the five week period were strong during the early part of the month, but negatively affected by an unspecified amount late in the month when severe winter weather hit the Northeastern U.S. Aside from that impact, BJ’s said traffic at its clubs increased modestly and average transaction sizes were flat.
BJ’s sales performance was largely overshadowed by several other moves at the company. The closure of five underperforming clubs was announced (three in Atlanta, one in Charlotte, NC and one in Sunrise, Fla.) and there were a couple of senior level personnel moves. CFO Frank Forward, who has been with the company since it was founded in 1984, will retire as part of planned succession strategy involving the appointment of SVP and director of finance Robert Eddy being elevated to the role of CFO. In addition, SVP field operations Cornel Catuna was named EVP club operations to fill the void created by the retirement of Thomas Gallagher who the company said was leaving for health reasons. The changes come amid escalating speculation that BJ’s is a candidate for a private equity transaction.