Before we begin: This post looks at same-store sales, meaning the sales figures from all branches of a store that have been open for a year or more. These same-store sales are also known as "comps." Comps are handy because they tell you what shoppers are doing relative to the same time last year, and they tell you whether a retail chain's sales growth is the result of (presumed) repeat business or of new outlets opening. Got it?
Your retail winners for the month: The Buckle (BKE) with a 13.5% rise over the year ago same-store sales; Aeropostale (ARO), up 12% over Dec 07; Walgreens (WAG), which saw comps grow 4.9% over the year-ago; Hot Topic (HOTT), which had a 4.3% rise over year-ago comps*; finally, American Apparel (APP), which managed to boost comps 3% over Dec 07 figures. Note that Aeropostale also gets a prize for biggest surprise: it had been expected to post a 4.2% drop in comps, and had a double-digit increase instead.
Your retail losers for the month: Abercrombie and Fitch (ANF) saw comps plummet 24%; Saks (SKS), which had a 19% plunge in comps; Cache (CACH) had a 19% drop; American Eagle (AEO) had a 17% decrease in comps; perennial Rage Diaries subject the Gap (GPS) posted a 14% drop in same-store sales. Four out of five of these -- Saks, Cache, American Eagle and the Gap -- also posted the biggest misses between forecasts for their same-store sales figures and what they actually made.
The general state of same-store sales in American retail: Overall, same-store sales dropped 0.9% in December. Take Wal-Mart (WMT) out of the equation, and same-store sales dropped 3.6%. To give you an idea of how a 3.6% drop (ex-WMT) measures up ... for the last three years, December cops (ex-WMT) have risen (4.1% in 05, 4.6% in 06, 1.3% in 07). This is the first time in a while where the American consumer has shopped less during a holiday season.
While these drops aren't as dire as had been forecast, a few notable points remain. First, this is the third month in a row where comps are down. In 2008, our long national shopping spree began wrapping up. Second, comps shrunk at what is ostensibly the height of the retail profit cycle. That speaks to serious concerns on shoppers' parts -- and a failure on retailers' parts to connect with consumers in a compelling way.
What retailers need to worry about now: Other than taking a beating in the stock market? They need to worry that consumers will no longer buy at price levels that were previously regarded as baseline. See also "After Sales, Will Shoppers Pay Full Price Again?" (WaPo, Jan 7, 09) and "Retailers Keep Cutting Prices" (WSJ, Jan 8, 09). J. Crew (JCG) and Bebe (BEBE) are already slashing prices -- before the merch even hits the stores -- and both the Gap and Ann Taylor (ANN) are presenting buy-multiples-and-save deals.
* I credit the vampires. That place loaded up on Twilight merch, and that fandom is not choosy.
Interesting that Aeropostale did better than expected, while the more-expensive-but-similar-looking A&F and American Apparel businesses did so much worse. A&F stated a few weeks ago that they were not going to move from their strategy to discount rarely, didn't they? Guess customer loyalty only goes so far.
The Gap's actually had some cuter stuff lately, but the stores are so BORING. It looks like Sears in there or something. I get the feeling they are having a hard time getting people to even bother setting foot in them.
I remember reading that it was expected that volume was going to be way up, but sales would be flat or down for many retailers, due to deep discounting -- how did that play out?
Posted by: drunken monkey | 01/08/2009 at 12:51 PM
I remember reading that it was expected that volume was going to be way up, but sales would be flat or down for many retailers, due to deep discounting -- how did that play out?
I don't have the hard numbers in front of me -- we won't get those until retailers report -- but given how deep January discounts are, I think the volume-over-profit story will be played again and again through Q408 and Q109.
*
FYI: Aeropostale hit the discounts early and often -- they were cutting prices by up to 70% on THANKSGIVING WEEKEND. My guess is that early discounting got them lots of foot traffic, plus favorable word-of-mouth and return visits from last-minute shoppers and bargain hunters.
Posted by: Lisa Schmeiser | 01/08/2009 at 02:11 PM
Based on the styles of clothing, it seems like the parents of children who were begging for A&F or AE for Christmas just walked down the mall corridor to Aero instead. They've always been the lowest-priced of the three, so they probably benefited from that reputation, and their early sales certainly couldn't have hurt that image -- especially compared against a $70 sweatshirt from A&F.
What surprised me was American Apparel. It's just my impression, but it feels to me like they suddenly just exploded EVERYWHERE, like they're about as reliable as Starbucks now in NYC -- so I'd have thought that even in a normal shopping year, SSS would be down.
Posted by: Alexandra | 01/08/2009 at 04:18 PM
American Apparel doesn't discount much either -- they'll send out coupons to their mailing list, and they have a small sale in store once in a while. But you never see a clearance rack in there.
I was in Old Navy today and I noticed that they are now selling hoodies that look just like the AA ones -- white zipper and string, same colours, including the grey mix that became popular after Lindsay Lohan was photographed wearing it while passed out in a car.
Posted by: drunken monkey | 01/08/2009 at 04:36 PM
There was a piece on Nightly Business Report (PBS) about Aeropostale a while ago (Sept. 2008?). It had been doing really well last year and their sales expectations weren't going to change much with the recession.
Posted by: Molly | 01/08/2009 at 05:24 PM
NBR tonight said that Gap (from a corporate standpoint) was holding out ok. They didn't get into much detail, but it sounds to me like they were bracing for this and set their financials in good order to deal with the bad hit. But again, these analysts are the same braniacs that predicted that the housing problem would be contained within subprime, so I'm not so sure I'd trust that much.
Posted by: Max | 01/08/2009 at 08:58 PM