Inside This Issue - News
On balance, January is good to mass retailers
February 20th, 2012
NEW YORK – Mass market retailers experienced varied fortunes during January, as big chains generally fared better than regional players. Unseasonably warm weather during the month was the scapegoat not only for apparel retailers but for regional discount chains as well.
According to Kantar Retail, the 21 retailers it tracks — most of whom are apparel chains — posted a sales-weighted composite average gain of 4.9%, which was a substantial improvement on the 3.6% increase in December and the 4.2% rise recorded for January 2011. The calculation excludes fuel and international sales for Costco Wholesale Corp.
Both Costco and Target Corp. managed to beat analysts’ predictions. Costco reported a total increase in comparable-warehouse sales of 8% that was driven mainly by its domestic locations, which generated a 9% gain while its international warehouses trailed with a 6% increase.
However, inflation in gasoline prices bolstered results, while foreign currency exchange had a negative impact on the retailer’s international business. Excluding those effects, Costco’s domestic operations produced an 8% increase while international improved by 9%, with overall comp sales still up 8%, well above the 6.1% average estimate among analysts polled by Thomson Reuters.
At Target, comparable-store sales advanced 4.3%, a healthy jump from the 1.7% uptick recorded last year and far ahead of the 2.1% increase projected by analysts. "January sales were near the high end of our expected low- to mid-single-digit range, reflecting strong performance in both discretionary and nondiscretionary categories," said chairman, president and chief executive officer Gregg Steinhafel. "Sales trends were healthy throughout the month and across the country."
Those performances contrasted with results at some regional discount chains. Memphis-based Fred’s Inc. reported a 0.8% dip in comp-store sales compared to a 2.1% increase a year ago. Fred’s fourth quarter comp-store results inched up 0.1%.
"We were pleased to see strong customer traffic in January, together with increasing pharmacy script counts," commented CEO Bruce Efird.
"We also witnessed a continued solid performance in pet and household supplies, two of our ‘Core 5’ departments. As in December, January sales were affected by unseasonably warm weather across our markets and the shifting of a month-end advertising circular."
Warm weather was also singled out as the culprit by Rich Wilson, president and CEO of Duckwall-ALCO Stores Inc. The Abilene, Kan.-based regional chain booked a 1.1% decrease in comparable-store sales, excluding fuel.
Fourth quarter comp-store sales dipped 0.6% without fuel. According to Wilson, the warm weather negatively affected not only sales of apparel but of hardware, auto and domestics as well.
Among drug chains reporting, Rite Aid Corp. posted a 2.2% year-over-year increase in same-store sales that was driven by a 2.7% gain at the front end, while pharmacy same-store results improved 2.1%. The prescription count at comparable stores rose 1.6%. Walgreen Co., on the other hand, saw total comparable-store sales plunge 4.6%, as its dispute with Express Scripts Inc. resulted in a 7.9% drop in pharmacy sales in comparable stores. Prescriptions in those outlets fell 8.6%.
Walgreens’ comparable-store front-end sales rose a modest 1.6%, reflecting a 0.6% reduction in customer traffic.
However, consumer sentiment appears to be a shifting variable, according to Kantar Retail. "Whether January’s growth can be sustained may depend on whether shoppers’ spending intentions show more signs of stalling out in the months ahead," said Frank Badillo, senior economist at Kantar. "That underlying trend appears to be overwhelmed at the moment by the mixed retail and economic reports."
Kantar Retail’s monthly ShopperScape consumer survey showed only modest improvement in shopper sentiment during January. The percentage of shoppers planning to spend less in the coming month declined slightly, marking a deceleration in the improvement shown in December and November.
In addition, the percentage of shoppers planning to spend more in February showed no improvement over December. The percentage of those intending to spend about the same this month rose to 53%, representing the greatest improvement among the three metrics.