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A Look at February Same-Store Sales; Enjoy the Transparency While It Lasts

As retailers reporting monthly sales are going the way of the dinosaur, enjoy the transparency while it lasts.

Last week we heard from the first round of major retailers reporting fourth-quarter earnings. Some were even cooperative enough to give us an early read on February's same-store sales. And why not? Good results or bad — it won’t be long before the companies have to rip off the Band-Aid and report the results on Thursday, March 1.

Target gave us the nod in February, running well ahead at up 4 percent. Limited noted trends of mid- to high-single digit gains versus guidance of in the low-single digits. And in the camp of low-balling the numbers, TJX called out 7 percent trends in February, although its first-quarter forecast is between 2 percent to 4 percent) and February comparisons are the easiest of the quarter.

In the case of Kohl’s, not all early looks were good ones. The company issued first-quarter and annual guidance well below the Street. And there is nothing like trying to backload comps for the year as renewed focus on price leadership efforts are expected to pay off.

Kohl's annual same-store sales are expected to rise 2 percent, while first-quarter guidance is for an increase of 1 percent (with February and April below the quarter and March above it). I have seen the “back-half recovery” story before and I can tell you that it usually does not end well.

While most of the thunder has already been taken out of this Thursday's February same-store sales report, there are exceptions.

A me-too story. We have not heard from Ross Stores as the company does not report its fiscal fourth-quarter earnings until March 15 and it still reports monthly comps. But if TJX is any indication, the momentum in the off-price space continues, and will only accelerate as we see gas prices crawling toward $5 this summer. In addition, a warm winter resulted in the trickle-down of must-have products to the channel as well as new vendor relationships.

A 'When will this turnaround happen?' story. The Gap rally year-to-date of up 20 percent reflects high expectations for Spring products — not to mention a store closure program and a shake-up in management ranks. The hope is that the “Be Bright” campaign, which launched Feb. 10 in North America, may mark an inflection point in a business that has been struggling for years.

After all, when you look at a Gap marketing campaign now, it no longer reads like a black-and-white photo. Think skinny jeans in pastel colors (yes, for men too). This Thursday, we will find out if the new Gap creative center, launched less than one year ago, is finally starting to turn this massive ship around.

It is unlikely February sales turned so early in the process (if they did, we would venture the company would have called it out during its fourth-quarter earnings report) as the new Spring line has been in stores just a few weeks. However, comments regarding how its products are being received will be key for the stock.

A 'We have it together when our competitors continue to fall apart' story. On the other end of the performance spectrum, we have Macy's, a turnaround that has actually worked.

The company issued annual comp guidance for 2012 of 3.5 percent on top of 2011 comp performance of 5.3 percent, but neglected to give us an early look at February sales. While the company disappointed slightly in January, the stock continues to grind ahead as selling tactics, its product localization strategy and its omnichannel approach continue to drive upward revisions to earnings.

Over the past year, Macy’s guidance has proved conservative. For example, its same-store sales estimates for 2011 started at 3 percent versus 5.3 percent actual. Investors are looking for a repeat performance. And that is not to mention the market share up for grabs at JC Penney (change disruption), Kohl's (continued guide-downs), and Sears (do I need to rehash another mess of a comp?).

Stacey Widlitz is the President of SW Retail Advisors Inc. She has worked at UBS, SG Cowen, Fulcrum Partners and in 2005 was one of three analysts to launch the Research Department at Pali Capital, where she covered Retail and Home Video for 5 years.

Retail