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December Dud: Same-Store Sales Disappoint — As Expected

NEW YORK — Consumers displayed a penchant for penny-pinching this holiday season, as the nation’s retailers Thursday reported same-store sale...

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Upside surprises in December included J.C. Penney, up 4.7 percent, and Gap, up 5 percent. While Limited Brands and Abercrombie & Fitch both beat plan with flat performance and Bebe Stores exceeded forecast with a 5 percent decline, Pacific Sunwear, Hot Topic, Chico’s FAS and Cache were among those toasting in the new year with double-digit gains.

With expectations extremely guarded, stocks constrained and margins insulated, more stores maintained or raised fourth-quarter profit outlooks than lowered them. Some hope to realize a bit of a new year’s bounce from business done with their gift cards, which aren’t recognized as revenue until redemption.



SPECIALTY STORES

December specialty store comps were mixed from both a comp and margin perspective, but there was some upside against very reduced expectations. Gap Inc. managed its third consecutive comp gain, after 30 months of declines, logging a 5 percent increase last month. Reclaiming the mantle of industry outperformer, the San Francisco-based apparel retailing heavyweight declared its overall December sales and merchandise margins exceeded its beginning-of-month projections, unlike the majority of the industry. Comps increased at all divisions: Old Navy, 9 percent; Banana Republic, 4 percent, and Gap, 2 percent.

Heidi Kunz, chief financial officer, commented: "We offered customers better balanced and brand-appropriate product assortments supported by more focused marketing and promotions."

At Gap, the popularity of accessories and outerwear led to higher conversion rates and units per transaction. Old Navy also experienced an increase in conversion rates as well as significantly improved average unit retail.

On the other hand, The Limited Brands missed its plan and reported flat comps and merchandise margins. The Victoria’s Secret brand delivered strong holiday results, offset by key category misses at Express and Bath & Body Works. Only VS comps, up 5 percent, were above plan, driven by a strong post-Christmas performance in both its bra sale and the first few days of the semiannual sale. B&BW comps were on par with last year’s, while Express, which had additional markdowns and increased promotional activity, saw comps fall 7 percent as those for Limited stores declined 4 percent. The company said it expects January comps to be flat and margins to be down significantly as it has more seasonal merchandise to clear compared with last year.
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