February 2010 laps performance a year ago that was generally regarded as having benefited from warmer weather that drove sales of Spring product. Yet, last week, the big-box retailers that reported Q4 results generally suggested that sales were relatively strong… despite record amounts of snow across the country that historically dampens sales.
Therefore, consensus comp store sales estimates for February 2010 are all over the map. Even though no one will likely provide updated EPS guidance, Thursday will be an interesting day!
Let’s assume that comp store sales are relatively strong in February 2010. How could this be? We’ve yet to hear a logical explanation other than February 2009 was the “credit crisis bottom.” While possible, let’s explore three issues that may have boosted sales in February 2010 relative to the conventional wisdom.
* Liquidation sales a year ago sapped traffic from the remaining big-box retailers (e.g. Linens, Circuit City, Mervyn’s, Gottschalk’s, etc.). The relative lack of liquidation sales this year has helped the big-box retailers. If so, many big-box retailers will “hit a wall” in the April/May 2010 timeframe. If the liquidation thesis holds water, will big-box retailers outperform specialty retailers tomorrow?
* GPS discussed a topic on its conference call last week that may help explain why sales did not fall off a cliff in February 2010. Retailers have had a full year of operating with limited inventory and fine tuning their promotional cadence to optimize revenue in this “new normal” environment. Have they simply fine-tuned their promotional models this year to most effectively drive traffic/sales?
Quote from Sabrina Simmons on the GPS Q4 2009 conference call last week:
“We are lapping a lot of promos we did last year, and we actually learned a lot and we know now which promos are more effective. We plan for those. We bought into them.”
* Finally, most retailers are using their social media marketing to drive snowbound consumers to web sites. In addition, consumers have certainly become more accustomed to purchasing from the Internet channel over the past 12-18 months and we’ve seen this in almost all the growth rates of retailers that supply this data. It’s possible that weather will no longer have the material impact on sales trends that the industry has come to expect (most retailers include Internet sales in their comp store sales calculation).
At the end of the day, February 2010 sales release Thursday may be the most unpredictable in recent memory.
