A Blow to the Middle

New York — While some merchants — notably the warehouse clubs, off-price chains and slow-but-steady Wal-Mart — posted fair to good comparative store sales gains for December, the bad news hit home hard in the middle market.

Department store titans Macy's, Bon-Ton and Dillard's reported sagging comps, and none had kind words for soft home. Neither did JCPenney, nor Kohl's.

Not even Target escaped, posting a 5.0% comp decline. While chairman and ceo Bob Ulrich — who last week announced his plan to hand over the ceo title to president Gregg Steinhafel on May 1 — noted that, "December sales were in line with the mid-month update provided on December 24," nevertheless he pointed out: "As a result, we continue to believe that fourth-quarter earnings per share will not meet last year's performance."

JCPenney, where December comps fell 7.5%, said, "The best performing merchandise categories in December were seasonal gift items across all divisions, housewares in the home division, family shoes and women's apparel," just the latest occasion when the 1,067-store retailer demurred from mentioning home textiles specifically — but did say its weakest areas were "fine jewelry and big-ticket home categories."

JCP said it now expects fourth-quarter results to show a mid-single digit decrease in department store comps (vs. a 2.2% gain last year).

Macy's comps fell 7.9% and the 850-store company said it "expects January same-store sales to be down by 4% to 6% compared with last year." Chairman, president and ceo Terry Lundgren said, "We remain on track to be within our guidance for same-store sales in the fourth quarter, albeit at the low end of the range of down 2% to up 1%."

At 929-door Kohl's comps dropped 11.4% and chairman and ceo Larry Montgomery felt compelled to say that customers' bargain-hunting resulted in "deeper discounts, affecting our gross margin." Kohl's said its best-performing categories for the year remain footwear, accessories and men's apparel.

"Our weakest performing categories were juniors and soft home," said Tony Buccina, vice chairman and president-merchandising at 280-unit Bon-Ton Stores. The comp story at Bon-Ton: a drop of 11.3%.

Keith Plowman, Bon-Ton evp and cfo, stated, "The decrease in December sales will negatively impact the previously provided earnings guidance for full-year fiscal 2007" to the tune of $27 million in EBITDA and by approximately $1 per share, a significant adjustment.

At Dillard's comps fell 5% in December, and were down 4% for the combined November-December period. Performance in the home department was sluggish, being mentioned in neither the above-average nor below-average merchandise categories.

Tracking 48 retailers, the Johnson Redbook Same Store Index fell 0.6% in December, following a solid 4.2% gain in November, which had come after a 1.6% gain in October.

Two key department store operators, Bon-Ton and Kohl's, were among seven companies that showed double-digit drops for the month. This reflected the overall weakness of the department store segment, which Redbook showed down 7.4% for the month, following a convincing 9.1 pickup in November.

Smoothing out seasonal oddities of the retail calendar, Redbook reported that fiscal 2007 year-to-date, the department store channel has posted a sluggish comp drop of 0.2%, vs. the fiscal 2006 gain of 4.1% for the segment. Discounters, meanwhile (Redbook includes the warehouse clubs in this segment) have managed a 2.3% comp gain this year, vs. last year's modest 2.8% increase.

Home fashions do not seem to be part of the gains in any major way.

At Sam's Club, which posted a 3.4% comp store increase, the company statement noted: "Home furnishing related items did not meet expectations."

Regardless of the year-to-year shift in the Thanksgiving holiday out of the December retail month, and the three-days-fewer holiday shopping window, regardless of the weather and the weak dollar and expensive oil, some categories like electronics and footwear are holding their own — but the news seems to be that home textiles are not exactly, as merchants sometimes like to say, "blowing out of the stores."