Following an already dismal holiday season, discounters and specialty chains alike reported worse-than-expected results for the four-week period ended Feb. 2. The month goes down in history as the worst January on record for retailers since the International Council of Shopping Centers began tracking same-store sales among U.S. retailers in 1969. The industry association said sales across the U.S. grew a meager 0.5% year over year.
"With uncertainty about the economy and the possibility of a recession, consumers have pared their spending," said Michael Niemira, the council's chief economist and director of research. "Looking forward to February, we expect much of the same, as U.S. economic problems do not seem to be dissipating anytime soon."
Whither gift cards?
Gift cards, which many were relying on to boost January sales, were notably absent from the mix. Retailers do not record sales of gift cards until they are redeemed, a point many took pains to make following the immense popularity of gift cards as holiday presents.
"As we have pointed out numerous times, gift cards to not save retailers from poor holiday seasons," said Eric Beder, senior VP at Brean Murray Carret & Co. in a research note. "In fact, we believe, by shifting sales away from higher-margin periods, that they exacerbate declines; this month should provide solid evidence for investors to ignore the 'fool's gold' of gift cards."
Wal-Mart, which touted steep promotions throughout the month, was a notable disappointment. The retail giant reported a slim 0.5% gain in stores open at least a year, excluding fuel. Wal-Mart Stores reported a weak 0.2% rise in same-store sales, while Sam's Club posted a modest 2.1% increase. In a statement, Wal-Mart said results were below expectations, as were gift-card redemptions. The grocery and the health-and-wellness categories were bright spots during the month.
Target Corp. also floundered in January, reporting a 1.1% decrease in same-store sales. The retailer said it was hurt by slower traffic and consumers who were stocking up on low-margin consumables. Like Wal-Mart, health-care products and food performed well. Lawn and garden products, accessories, and jewelry underperformed.
Lone bright spot
The lone bright spot in the discount sector was Costco, which was also one of the few strong performers during the holidays. The retailer reported a better-than-expected same-store-sales increase of 7%.
Like the majority of the discount sector, department stores were particularly hard hit last month. Macy's Inc. reported a 7.1% drop in same-store sales yesterday. It also announced that it would cut 2,550 jobs, as it consolidates its divisions. Same-store sales at JC Penney declined 1.9% despite seasonal clearance activities.
At Kohl's, sales at stores open at least a year dropped 8.3% in January as customers limited their purchases. Total sales also took a nosedive during the month, down 20.4% or $800 million. "Customers continue to be selective in their purchases, driven by value and need," said Larry Montgomery, Kohl's chairman-CEO, in a statement.
Luxury no better
Among the luxury players, the story was much the same. Nordstrom reported a 6.6% decline in same-store sales, along with a total sales decrease of 20.3%, or $124 million, for the month. Saks Inc. and Neiman Marcus, owner of Bergdorf Goodman, posted modest gains of 4.1% and 3.3%, respectively.
Specialty retailers were also not immune to January's difficult retail environment. Limited Brands, the parent of Victoria's Secret and Bath & Body Works, fared poorly. Same-store sales across the company declined 8%.
Gap Inc. said same-store sales across its divisions declined 2%. Gap North America was the weakest performer, with a 4% falloff, while Old Navy North America saw same-store sales drop 3%. Banana Republic continued to be the company's best performer, posting a 5% increase in stores open at least a year.