Seeking Alpha
Profile| Send Message|
( followers)  
  • Most retailers reported comp store sales results for January 2011 that were generally -100 Bps to -200 Bps less than December 2010. There are no excuses in February 2011. In February 2010, essentially every retailer complained about weather negatively impacting sales.
  • Besides weather, a few retailers suggested that the later timing of tax refunds and the “inability to get tax refund anticipation loans” negatively impacted sales in January 2011 versus last year (e.g. Big Lots (NYSE:BIG), Citi Trends (NASDAQ:CTRN), Fred's (NASDAQ:FRED)). Interestingly, in February 2010, some pundits (and CTO (NYSE:CATO)) were suggesting that sales were boosted in that particular month by earlier tax refunds.

That said, there does appear to be a split in January 2011. Chains targeting consumers on the lower-end appear to be reporting weaker top-line results than those targeting the middle and higher-end. Is this a precursor of things to come?

  • Abercrombie & Fitch (NYSE:ANF) finally admits failure. Gilly Hicks was possibly the absolute worst chain roll out from a profitability perspective in specialty apparel history. Despite modest improvement this year, calculations suggest the chain is still producing sub-$200 sales per square foot. Not good in Class A real estate.

That said, the write-off of net book value in Q4 2010 will boost total enterprise EPS and profitability in FY 2011.

  • We reported last month that Costco (NASDAQ:COST) utilized the weather excuse in fiscal December four straight years through December 2010 (i.e. weather impacts on comp store sales provided in December 2007, December 2008, December 2009, and December 2010). Absolutely ridiculous.
  • Today, the company estimates a -1.0% to -1.5% comp store sales impact via weather in January 2011. In January 2010, the company suggested a -100 Bps impact via weather. The fact is that this year’s weather was relatively comparable to last year’s weather.
  • COST disclosed that its average gas price in January 2011 was $3.06 versus $2.65 in January 2010 (+15%).
  • Worth a chuckle ... a year ago today, Gap (NYSE:GPS) made the following statement on its January 2010 sales press release:

“January’s results are evidence that our strategy to improve our topline is gaining traction.”

  • J.C. Penney (NYSE:JCP) suggests that sales in January 2011 were impacted by “lower levels of clearance inventory when compared to the same period last year.” What’s interesting is that the company made the following statement last year:

“Overall, sales in January were largely influenced by our planned lower levels of clearance inventory and selling.”

The question is do you believe them? Yes, JCP has been pulling its clearance sales forward of late (big picture, everyday versus end of season). But, we’re skeptical and can’t wait to see the inventory numbers in two weeks.

  • Target (NYSE:TGT) management talked a big top-line game in mid-November. Then, a month ago, the company suggested that it needed its credit operation and a favorable tax rate to hit the consensus estimate of $1.40.

Today, the company again thumped its chest by suggesting that the RedCard and PFresh initiatives would “drive even more meaningful increases in Target’s fiscal 2011 comparable store sales.” Not only is this a yawner after the company’s inability to live up to its Q4 2010 comp sales guidance, but notice how this statement says nothing about profitability.

Next year’s consensus EPS estimates for TGT are too high. Despite relatively strong comp store sales, the retail division’s EBIT margin decline in Q4 2010 versus last year is cause for longer-term concern.

Our Compology this month is measuring relative top-line strength/weakness by comparing January 2011 comp store sales versus December 2010.

The following retailers reported a relatively stronger comp store sales result in January 2011 versus December 2010 (relative strength/improving trend):

  • Limited Brands (LTD) (+19.0% improvement in January 2011 versus December 2010)
  • Wet Seal (WTSLA) (+8.3% improvement in January 2011 versus December 2010)
  • Zumiez (NASDAQ:ZUMZ) (+6.1% improvement in January 2011 versus December 2010)
  • Aeropostale (NYSE:ARO) (+6.0% improvement in January 2011 versus December 2010)

The following retailers reported a relatively weaker comp store sales result in January 2011 versus December 2010 (relative weakness/decelerating trend):

  • Abercrombie & Fitch (ANF) (-19.0% decline in January 2011 versus December 2010)
  • Saks (NYSE:SKS) (-7.4% decline in January 2011 versus December 2010)
  • J.C. Penney (JCP) (-4.9% decline in January 2011 versus December 2010)
  • CATO (CATO) (-4.0% decline in January 2011 versus December 2010)

Looking Ahead By Looking Back ... What Happened in February 2010?

In February 2010, despite miserable weather, many retailers ‘beat’ consensus comp store sales expectations. Top-line results defied logic as the relatively strong sales across the board were lapping two consecutive Februarys in which sales were boosted by warmer than normal weather. Some folks believed that earlier than normal tax refunds were the reason for stronger than expected sales in February 2010.

Specifically, the following companies blamed weather for negatively impacting sales in February 2010: ARO, BJ's Wholesale (NYSE:BJ), COST, Destination Maternity (NASDAQ:DEST), Macy's (NYSE:M), Stage Stores (NYSE:SSI) and WTSLA.

In February 2010, the strongest performance was in soft home, women’s apparel and shoes.

In February 2010, retailers generally reported material merchandise margin improvements versus the prior year.

Weeks No. 1 and No. 3 were generally considered to be the strongest fiscal weeks in February 2010. Week No. 2 was generally held to be the weakest fiscal week in February 2010.

The Southeast and West were generally held to be the strongest comp store sales regions in February 2010. The Northeast was generally held to be the weakest comp store sales region in February 2010.

Source: Random Thoughts on Same-Store Sales for January 2011