=Back-To-School Shoppers Gravitate Toward Value
Dow Jones News Service via Dow Jones
By Philana Patterson
NEW YORK (Dow Jones)--Consumers applauded lower prices in August as
value-oriented retailers and those offering goods at promotional prices saw
heavy back-to-school traffic and strong same-store sales gains.
Value-oriented department store chain Kohl's Corp. (KSS) was a big winner with
a 17.5% same-store sales increase.
"All their stores in all regions are performing very, very well," said Smith
Barney Inc. analyst Richard Church. "Plus they are very disciplined about laying
out a promotional schedule."
Church said Kohl's also benefited from stocking NFL-licensed apparel early in
the football season.
Analysts said proof that consumers are gravitating toward value can be seen in
the strong performances by Wal-Mart Stores Inc. (WMT), which registered a 7.7%
comparable-store increase; Kmart Corp. (KM), which reported a 6.4% same-store
sales increase; and Dayton Hudson Corp.'s (DH) Target division, which had a 8%
comparable-store sales gain.
Department stores saw healthy same-store sales gains, with Federated
Department Stores Inc.'s (FD) 3.5% same-store sales increase slightly ahead of
analysts' expectations. May Department Stores Co. (MAY) posted a 9%
comparable-sales increase, beating analysts' expectations of a 5% to 6% gain.
Dillard's Inc. (DDS) reported a 5% same-store sales increase.
The BT Alex. Brown Same-Store Sales Index of 100 companies was up 5.3% in
August, with discounters showing a 7% same-store sales increase.
BT Alex. Brown analyst Patrick McCormack said that, overall, the
back-to-school selling season was strong, but the results show that "discounters
are getting a bigger and bigger piece of the pie."
Less of the pie was served to AnnTaylor Stores Corp. (ANN), which reported a
22.1% comparable-store sales decrease. After a fashion miss dampened AnnTaylor's
spring and summer sales, the company moved its fall merchandise in early and
employed a strategy that focused on appealing to full-price, career-oriented
customers. The company said in a statement that "the strategy had the unintended
consequence of disappointing the item-driven customer segment of our business
and affected our ability to capitalize on back-to-school traffic."
AnnTaylor's NYSE-listed shares recently were trading down 12.6%, or 2 1/8, at
14 3/4 on volume of 2.5 million, compared with average daily volume of 341,600.
AnnTaylor's results were a surprise to many industry watchers. Barnard's
Retail Marketing Report editor and publisher Kurt Barnard said the company's
August sales show most consumers are willing to spend money - just not as much
as in the past.
"Consumers are buying, but they are buying more moderately priced apparel,"
Barnard said. "They're finding that they can be very nicely dressed and very
elegant without going bankrupt in the process."
Barnard said Sears, Roebuck & Co.'s (S) double-digit growth in women's
ready-to-wear, cosmetics and fragrances in August is further evidence that
consumers will buy moderately priced goods. Sears reported a 2.8% same-store
sales increase - below its internal plan - due in part to sluggish home
improvement sales.
AnnTaylor said that despite its same-store sales decrease, its average
transaction increased significantly in the month and that suits, shoes and
leather and suede merchandise showed strength.
J.P. Morgan Securities Inc. analyst Maura Hunter Byrne said it was hard to say
whether AnnTaylor couldn't convert existing traffic into sales or just didn't
get the traffic it needed.
Gap Inc. (GPS) benefited from heavy back-to school promotions, said Bear
Stearns & Co. analyst Steve Kernkraut. The retailer, which reported a 16%
comparable-store sales increase, got a lot of traffic in August as its Cargo
pants promotion lured customers to its Old Navy stores. Overall, men's business
also strengthened companywide in the month as Gap has focused on improving that
end of the business, Byrne said.
Despite the good results for the value-oriented group and for specialty
retailers who offered promotionally priced items, department store companies
such as May and Dillard's didn't promote as heavily and still had solid results,
analysts said.
"There's just good underlying momentum across the board," said Montgomery
Securities Inc. analyst Tom Tashjian.
Also, good sales early in the third quarter could bode well for earnings,
analysts said.
"Most of these sales are full margin sales," said BT Alex. Brown's McCormack.
"That's why I'm encouraged."
(END) DOW JONES NEWS 09-04-97
01:32 PM |
