Analysts across the board predicted retail sales to rise during the holiday period. But so far, the gains have not been shared by all.
Profligate discounting could make 2019 the most promotional holiday season since the recession, according to one analyst. And hardest hit by price wars may be department stores, some of the largest of which have reported comparable sales declines for the all-important sales period.
Along with department stores are apparel sellers and other specialists tied to the same malls. The struggling L Brands, with its declining Victoria's Secret brand, also reported negative comparable sales for the holidays, for example.
The fourth quarter could exacerbate problems for some retailers, while adding to the momentum of the industry's winners. The fourth quarter also sets the stage for 2020, which could very well bring retail growth but lies under a cloud of economic uncertainty.
J.C. Penney
J.C. Penney's comp sales fell 7.5% for the nine weeks ending Jan. 4. Excluding large appliances and in-store furniture — categories the retailer exited — comps were still down 5.3% during the holiday period. That adjusted figure is worse than the 4.1% negative comps Penney reported for the 2018 holiday period. The company's stock price fell by more than 4% in the early minutes of trading on the day of the announcement.
The negative comparable sales continues a streak of sales losses in recent periods as the struggling department store retailer tries to rebuild its profits and ultimately its sales base through merchandising initiatives and a new test store, among other moves.
The holiday period didn't change Penney's guidance for the full fiscal year 2019. Executives still expect comp declines of 7% to 8% and adjusted comps (with furniture and appliances taken out) of negative 5% to 6%. Penney also expects positive cash flow, EBITDA of more than $475 million and for cost of goods sold to decline by up to 200 basis points.
Kohl's
Last year, Kohl's saw holiday comp sales rise 1.2%, which some analysts deemed a disappointment while others saw progress. Any momentum appears to have slowed this year: the department store on Jan. 9 reported that November to December holiday comparable sales fell 0.2% year over year. In response, the retailer pulled back expectations for its fiscal 2019 earnings to the lower end of its guidance.
In a statement, CEO Michelle Gass noted that the holiday period had healthy sales in e-commerce, activewear, beauty, children's and men's, but missed on women's apparel. Indeed, GlobalData Retail research has found that Kohl's is ceding market share in that segment to Target and off-price retailers.
The decline could represent a referendum of sorts on the retailer's tie-up with Amazon — all Kohl's stores now take Amazon returns. That has boosted traffic, though it's not clear how much it's boosted sales. Of course, the holiday returns season isn't likely over and could yet give Kohl's a lift.
The results were "not a disaster," GlobalData Retail Managing Director Neil Saunders said in emailed comments. "However, they demonstrate that there is still much work to do in improving the offer. Initiatives like Amazon returns are good at driving footfall, but Kohl's needs to convert that traffic into money in its own registers."
L Brands
For the nine-week holiday quarter ended Jan. 4, L Brands said net sales dropped to $3.91 billion from $4.07 billion last year. Comparable sales fell 3% in the period, and margins shrank. As it was all year, the story was one of decline in the company's signature lingerie business and growth in its smaller bath and beauty business.
Victoria's Secret's holiday was "below expectations," according to a webcast posted by Chief Investor Relations Officer Amie Preston, with quarter-to-date comps falling 12% at that brand, traffic down in the mid-teens and margin rate "down significantly" due to increased promotions. The brand's sister line, Pink, didn't fare any better, with comps down mid-teens and margins also down significantly, she said.
By contrast, the company's Bath & Body Works unit, which also suffered holiday margin declines due to promotions, tariffs, wages and last year's cost concessions, saw "strong customer response" to key promotions, and comps were up 9%, Preston said.
That's because the personal care retailer had strong seasonal merchandise that appealed as gifts or self-indulgences, with "bright and cheerful" stores and good holiday deals, according to GlobalData Retail Managing Director Neil Saunders.
But Victoria's Secret dragged that down, as it had all year, he also noted, adding that it's unclear whether L Brands executives will make needed changes. "It would be unfair to say that Victoria's Secret made no effort over the holidays," Saunders said in emailed comments. "But that effort did not bear fruit because, as usual, marketing and merchandising were misplaced. Consumers were looking for cozy, but the brand delivered risqué. That meant many shoppers went elsewhere."
Macy's
Macy's reported that store comps on an owned basis fell 0.7% over the nine-week holiday period ended Jan. 4, as comps on an owned plus licensed basis fell 0.6%. The impact on comp sales from "departments licensed to third parties" was growth of 0.1%, according to a company press release.
The decline was viewed by most analysts with a sigh of relief, in light of Macy's disastrous third quarter. What got more attention was the department store's same-day revelation of plans to shutter nearly 30 stores — 28 namesake stores and one Bloomingdale's — equal to almost a third of the 100-store reduction the company undertook a few years ago. The company said it would discuss such plans further during its investors day next month, though neither J.P. Morgan nor Credit Suisse analysts expect more closures to be announced for the year.
What Credit Suisse analyst Michael Binetti says he would like to see is more investment in 150-200 locations, similar to the attention now benefiting Macy's select "Growth150" magnet stores. Otherwise, some 250-300 stores are left "without a meaningful strategy," he warned in a Jan. 8 client note.
via https://ift.tt/2Jn9P8X by Ben Unglesbee and Daphne Howland, Khareem Sudlow
