School sales off to slow start
Published 9:00 pm Wednesday, August 2, 2006
Jittery investors have sent teen retailers’ stocks tumbling after Goth-inspired Hot Topic Inc. announced disappointing sales at the start of the important back-to-school season.
Youth apparel companies that saw their shares slip Tuesday included Abercrombie &Fitch, Aeropostale, Gap, Volcom and Everett-based Zumiez Inc., which lost 5.5 percent of its share value.
On Wednesday, Hot Topic and Aeropostale lost ground again, while competitors’ shares were up by a few dimes. Zumiez shares headed down by more than 5 percent in after-hours trading, however, after the chain released same-store sales for July.
Hot Topic, which sells many rock music-themed products, has led the downturn. Its shares fell more than 22 percent Tuesday and Wednesday to close at $11.60, down $3.10.
“I’ve got red ink across the board on the screen,” said retail analyst Robert Buchanan, surveying the day’s dropping stock prices on his computer at A.G. Edwards &Sons Inc.
After the market closed Monday, Hot Topic said sales at established stores were flat in the first couple weeks of July and dropped significantly in the second half of the month. It also said it anticipated a second-quarter loss of 2 cents to 3 cents a share.
The disappointing news set investors, and some retailers, on edge.
Retailers are struggling to get a read on consumers as the back-to-school season heats up, said Britt Beemer, chairman of America’s Research Group, a market research firm in Charleston, S.C. And figuring it’s never too soon to worry about the holidays, some of them now have leapfrogged ahead to question “whether this back-to-school thing is a precursor to Christmas,” he said.
“None of them are seeing the kind of traffic in the stores that they thought they would see at this point,” he added.
It’s too soon to know how the back-to-school season – which peaks in August and stretches into September – ultimately will play out. But investors will get a clearer look today at how it began, when many of the United States’ largest retail chains release same-store sales for July.
The International Council of Shopping Centers, which releases those numbers, said Tuesday that same-store sales growth probably slowed to 2.5 percent last month, largely due to sweltering temperatures in much of the nation. That compares with a 3.6 percent gain in July 2005 and an average monthly gain of 3.8 percent so far this year.
“I don’t think it’s one thing, though I would suspect weather has something to do with it,” said Sara Hasan, an analyst with McAdams Wright Ragen in Seattle who follows Zumiez. “All these retailers are rolling out their fall merchandise, but it doesn’t make sense to buy a big, heavy sweater when it’s 90 degrees or more outside.”
July is relatively unimportant to apparel retailers because it’s largely a month when stores are marking down summer clothing to make way for fall merchandise. Typically, it’s the third-weakest sales month of the year.
The shopping center group has predicted that back-to-school spending will rise 3 percent to 4 percent over last year, prompting sales of $24.3 billion to $24.5 billion.
Zumiez shares dip
Zumiez Inc., the Everett-based chain of 221 teen-oriented sportswear and equipment stores, said same-store sales rose 8.4 percent in July. That was slightly lower than analysts’ consensus estimate, and the company’s shares fell in after-hours trading on Wednesday. Thanks to the chain’s fast expansion in terms of overall stores, total sales for the month increased 45 percent, to $19.8 million.
Zumiez sales dip
Zumiez Inc., the Everett-based chain of 221 teen-oriented sportswear and equipment stores, said same-store sales rose 8.4 percent in July. That was slightly lower than analysts’ consensus estimate, and the company’s shares fell in after-hours trading on Wednesday. Thanks to the chain’s fast expansion in terms of overall stores, total sales for the month increased 45 percent, to $19.8 million.
