By Nathalie Tadena
Retailers posted muted sales gains in September as they stepped
up promotions in an effort to entice consumers who remain cautious
about their spending, in part due to concerns about the broader
economy and government shutdown.
Same-store sales--for the few companies that still report
monthly results--came in below expectations as retailers were hurt
by continued weak mall traffic and increased promotions, especially
among teen-focused companies.
Teen retailer Buckle Inc. (BKE) was one of the worst performers
of the month, posting a 4.5% decline in same-store sales, when an
increase of 1.2% was expected. In the women's division, which
represents more than half of Buckle's sales, the company said sales
fell slightly while price points were down 3.5%.
September proved to be a difficult month, said Ken Perkins of
Retail Metrics, noting "back-to-school sales were lackluster at
best" and "the fashion cycle was uninspiring." He noted consumer
confidence waned in part due to government shutdown worries and
that consumers continued to focus on bigger-ticket purchases such
as cars, housing and student loans.
The nine retailers tracked by Thomson Reuters were expected to
show 3.1% growth in September same-store sales, or sales at stores
open at least a year, versus the 5.5% increase posted a year
earlier. So far, eight of the companies have reported and posted a
2.2% increase. Gap Inc. (GPS) is slated to post results after
market close Thursday.
Many retailers, including the major department stores, have
stopped reporting monthly results over the past year, making it
more difficult to gauge the performance of the entire industry.
David Bassuk of consulting firm AlixPartners said consumers are
willing to spend on select "must-have items," but retailers must
offer compelling values and new ideas to entice them to open their
wallets.
"The consumer is very pensive," he said. "They're cautiously
looking around, they're holding back on spending and they're really
uneasy about what is going on in Washington. When a consumer feels
this way, the retail community needs to be much more aggressive to
get them to spend."
Teen consumers in particular have been much more cautious with
their spending, prompting retailers to step up promotions and
discounts.
Teen retailer Zumiez Inc. (ZUMZ) reported a 0.6% decrease in
same-store sales, in line with expectations. Footwear, men's and
boy's categories posted weaker same-store sales, while juniors,
hard goods and accessories had positive comparisons.
L Brands Inc. (LTD)--formerly Limited Brands---reported
same-store sales rose 1%, below analysts' estimate of 2% growth.
The company said it undertook more markdowns than planned to boost
traffic. The increased promotions, particular in the younger
consumer-focused Pink division, drove the company's merchandise
margin rate down from a year earlier. Of L Brands' units,
Victoria's Secret, which houses the Pink division, posted a 1%
increase in same-store sales, compared with an expected 2.2%
increase. Meanwhile, Bath & Body Works sales rose 2%, topping
the expected 1.5% increase.
Discount retailer Fred's Inc. (FRED) said same-store sales rose
2.8% last month, topping analysts' expected 2.3%. The company said
pharmacy sales and script growth were key to its performance last
month.
Costco Wholesale Corp. (COST) reported its U.S. same-store sales
for the month increased 5%, excluding impacts from gasoline price
deflation and foreign exchange, just shy of the 5.1% growth
analysts had expected. Among the warehouse-club operator's
strongest performing categories were food and sundries. The
southeast and Texas were strong performers by geography last month.
Costco also reported fiscal fourth-quarter earnings and revenue
that missed Wall Street estimates, with some analysts pointing to a
rise in overhead costs.
The back-to-school season is often seen as an indicator for a
retailer's performance during the key holiday period. The National
Retail Federation expects sales in November and December to
increase 3.9% from the prior year.
Write to Nathalie Tadena at nathalie.tadena@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires