Comps Show Mixed Results

News

What is particularly noteworthy about the June 2008 comp-store-sales results is the comparison to very poor results in June 2007. Notably, June 2007 was the first month to indicate broad weakness in consumer spending.

It appears that the economic-stimulus checks and heavy promotion in June 2008 did provide some sales lift, particularly at Kohl’s, J.C. Penney, Stage Stores, Family Dollar, Fred’s, Ross and Gap. All of these companies generated results better than their recent trends. In spite of the stimulus checks, comp-store sales continue to deteriorate at Nordstrom, Saks, Abercrombie & Fitch, Bon-Ton, Limited and Zumiez. It is unlikely that many Nordstrom and Saks core customers received checks. In spite of all external factors, trends continue to improve at Wal-Mart, Aeropostale, The Buckle, The Children’s Place, Costco and TJX. The entire Trending Report is available at www.gordmangroup.com .

The Retail Trend Tracker: When trends are not strong, management frequently turns to advertising as the solution. Unfortunately, I have never seen it work, not once.

Advertising is the communication a company should use after it has created a “customer-relevant strategy.” When management turns to advertising as the solution to weak sales, there is typically little change in the sales trend with an increased advertising expense and reduced profitability due to margin deterioration. As a strategy, “perfuming the pig” simply does not work.

#start# http://www.chainstoreage.com//Images/Aug08/chart1.JPG

In our recent Retail Trend Tracker study, we asked a national sample of consumers, who actually spent more at a specific retailer during the past three months, how different factors affected their spending behavior. The accompanying chart compares the influence of having merchandise the customer wants with the influence of advertising.

Even with the aggressive promotional advertising that has been utilized by retailers to drive traffic, having the right merchandise is the dominant factor to increase sales.