A “Volatile” June Makes for Disappointing Sales Comps

New York—A combination of bad weather mixed with “stagnant” macroeconomic pressures created a recipe for a disappointing June at retail.

According to Thomas Reuters’ survey of 20 leading retailers, June comparable store sales rose a mere 0.2%, missing analysts’ estimate for a 0.5% increase.

“Volatility is the word that best describes the June performance,” said Michael Niemira, chief economist for the International Council of Shopping Centers (ICSC). “Weather was one factor that was cited as a drag on the overall performance, but some retailers pointed to broader economic uncertainty as well.”

Indeed, the ICSC on Tuesday trimmed its forecast for June comparable store sales to a rise of 1% to 1.5% from an earlier forecast of 1.5% to 2%, citing the nearly 2 million Americans hit by storms that left them without electrical power for nearly a week.

Similarly, Retail Metrics released its preliminary figures for comp sales from 20 retailers: a 1% increase, compared with a 7.2% increase a year ago. While many retailers may be up against strong comp numbers from June 2011, there’s still some pullback in consumer spending.

‘Give Pause’ to Retailers on Back to School?

“In June, consumers put on a very cautious hat, they started pulling back,” said Keith Jelinek, a director in AlixPartners’ global retail practice. While Terry Lundgren, Macy’s chairman, noted: “In part, this was a function of a macroeconomic environment that is stagnant at best.”

“Macroeconomic issues continue weighing, making the consumer more reluctant to spend,” said Nancy Liu, retail strategist at Kurt Salmon. “This is going to give retailers pause for back-to-school selling.”

That could be worrisome to retailers, who look forward to the back to school season which accounts for the second largest sales season behind holiday. Already many retailers have started their back to school promotions early, hoping to entice consumers who tend to spend more on their children even if they pull back on discretionary spending.

Of the retailers who reported increases today, there’s a mix of higher end, such as Nordstrom and Saks Inc., as well as off-price retailers like TJX and Ross Stores. Other strong performers were Zumiez, Limited Brands and Stage Stores.

Among the stores that missed their comparable store estimates were Target, Macy’s, Wet Seal, Kohl’s and Wet Seal.

While some major retailers, including Walmart, Sears, JCPenney and Dillard’s, no longer report monthly comparable store sales, economists say tracking these sales figures helps to provide a barometer of what’s going on with consumer spending, which accounts for some 70% of the U.S. economy.

Among those retailers reporting their June sales figures were:

●Macy’s Inc. reported a rare miss in its June comparable store sales, which rose 1.2%, below the 1.9% increase analysts had expected. Total sales were up 0.8% to $2.412.

Noting that the June figures were below expectations, Terry Lundgren, chairman/ceo, blamed a “stagnant at best” macroeconomic environment and lower spending by tourists in cities such as New York.

“Additionally, the unprecedented renovation at Macy’s Herald Square, the world’s largest store, is well under way but created more short-term business disruption than anticipated in the June sales period. We are on schedule to open the first phase of the largest women’s shoe department in the world this August,” said Lundgren.

Bright spots: Father’s Day sales and the company’s “Brasil” promotion.

●Kohl’s posted a 4.2% drop in comparable store sales, worse than the 3.2% decline analysts had projected. Total sales fell 2.6% to $1.71 billion.

“Though June sales were again lower than expectations, we are encouraged by improved sales in the latter weeks of the month as we continued to build inventory levels,” said Kevin Mansell, chairman/ceo. “From a line of business perspective, men’s and footwear were the strongest categories. The Midwest was the strongest region.”

●Nordstrom Inc. saw its June comparable store sales jump 8.1% ahead of the 4.7% analysts expected. Total sales were up 12.6% to $1.04 billion. Best performing categories included handbags, jewelry and shoes.

●Saks Inc. posted a 6% increase in its June comparable store sales, ahead of analysts’ estimate for a 4.7% rise. Total sales rose 6% 2% to $274.0 million. Strongest categories were women’s footwear; men’s private brand, tailored clothing, and shoes; and cosmetics and fragrances.

●Bon-Ton Stores reported an 0.8% decline in its June comparable store sales. Total sales edged down 1% to $238.3 million.

“June sales were uneven throughout the month,” said Brendan Hoffman, president/ceo. “During the Father’s Day promotional period, customers responded favorably when we strengthened our marketing with emphasis on value, which also improved the ease of our customers’ shopping experience. We were disappointed, however, with sales at the end of the month, which we believe were negatively affected by the timing of the July Fourth holiday and the severe storms in some of our markets.”

Best performing categories included fine jewelry, cosmetics, hard home, women’s’ accessories and shoes. Poor performing areas were women’s sportswear, furniture and children’s.

“Our e-commerce business had an excellent month generating a double-digit sales increase, Hoffman said.”We are effectively reducing our seasonal inventory levels as we transition into back to school and fall merchandise assortments.

●Stage Stores reported a 3.3% increase in comparable store sales for June, better than the 2.7% increase that analysts expected. Total sales increased 5.8% to $141 million.

The company said sales were broad based, with cosmetics, footwear, home and gifts and men’s categories exceeding the company average. Geographically, the Northeast, South Central, which includes Texas, and Southwest regions outperformed.

● Target posted a 2.1% increase in its June comparable store sales, just missing a 2.8% increase that analysts had expected. Total sales rose 2.6% to $6.42 billion.

Target also predicted its will meet its second quarter sales and earnings goals. Comp sales were strongest in food, health and beauty but home and hardlines saw declines. Regional performance was strongest in the Midwest and West but below company average in parts of the South.

● Gap Inc. said its June total comparable store sales were flat compared with a 1% increase for June 2011. Analysts’ average estimate expected a 0.1% increase. Total sales were up 2% to $1.41 billion.

“We’re pleased with our overall sales performance in June, especially the continued positive trend in our North America business,” said Glenn Murphy, chairman/ceo.

Gap North America comparable sales grew 4%, compared to a decline of 1% last year. Banana Republic North America had a 5% increase in comp sales, vs. a 3% increase a year ago. Old Navy North America’s comp sales increased 1%, lower than a 2% increase in the previous year.

Its International division posted a 14% comp decline, compared with a 3% increase last year.

● Limited Brands Inc., parent of Victoria’s Secret and Bath & Body Works, posted a June comparable store sales growth of 7%, more than double expectations for 2.4% rise. The company’s Victoria’s Secret direct sales segment swung to a comparable store sales gain as other divisions including Bath & Body Works and Limited Brands saw smaller increases than the same period last year.

● Cato Corp. reported a 10% drop in its June comparable store sales, worse than analysts’ estimate for flat comp sales. Total sales fell 7% to $83.7 million.

“June same-store sales were below expectations,” said John Cato, chairman/ceo.”Year-to-date same-store sales results have been volatile, driven in part by various economic and political uncertainties as well as unseasonable weather. We believe it is likely this volatility will continue and we remain cautious as we look toward the second half of the year.”

● Wet Seal said comparable store sales dropped 9% in June, more than the 7.7% drop analysts had expected. Total sales fell 7.5% to $53.6 million.

Susan McGalla, ceo, said: “June sales were in line with our expectations. We maintained sharp promotional levels through the month, as planned, in our efforts to ensure inventories at both Wet Seal and Arden B are well-positioned entering the fiscal third quarter.

The company is working toward a strategy of selling more merchandise at full price and aligning its online merchandising with store sales. Online sales fell 5% compared with a 17% drop last year.

“June represented the anniversary of our strategic efforts to transition to a higher penetration of full-price selling and better align e-commerce merchandising with our stores,” McGalla said. “We expect continued stabilization in our e-commerce sales going forward.”

● Buckle Inc. reported its first comparable store sales decline in more than 2 years: 2.5% worse than analysts’ estimate for flat comps. Total sales decreased 0.3% to $79.4 million.

● Zumiez saw its June comparable store sales rise 8.2% just missing analysts’ estimate for a 8.4% increase. Total sales rose 18% to $51.3 million.

Best performing categories included men’s wear, footwear, juniors, and accessories while sales of boy’s merchandise was weaker.

● Ross Stores beat analysts’ average forecast for a 4.8% increase in its comparable store sales by hitting a 7% increase. Total sales increased 12% to $886 million.

“We are pleased with our better-than-expected June sales,” said Michael Balmuth, vice chairman/ceo. “Our ongoing ability to deliver terrific name brand bargains to today’s value-focused shoppers drove broad-based merchandise and geographic sales gains during the month.”

Looking ahead, Balmuth said based upon “our above plan sales and gross margin performance in May and June, and our continued projection for a 2% to 3% increase in July same store sales,” the company raised its second quarter earnings forecast.

● Stein Mart posted a 0.5% drop in its June comparable store sales. Total sales rose 0.2% to $104.7 million.

Linens, women’s career sportswear, and men’s furnishings and accessories posted the strongest sales for the month while men’s sportswear, women’s casual sportswear and dresses were weaker. Geographically, June sales were strongest in California and the Midwest, while Florida and the Southeast were weaker.

“The weather distractions we endured during June in Florida and many of our other markets challenged our business,” said Jay Stein, interim ceo. “We are never satisfied with simply flat sales but given these disruptions we are not uncomfortable with our results.”

● TJX Cos., parent to T.J. Maxx, HomeGoods and Marshalls, posted a 7% increase its June comp sales, topping expectations of 4.2%. Total sales jumped 9% to $2.3 billion.

“It is great to see such consistent, strong performance across the company, with all of our businesses in the U.S., Canada and Europe continuing to deliver excellent results,” said Carol Meyrowitz, ceo, “Customer traffic during the month increased substantially at every division which speaks to the tremendous appeal of our values, brands and fashions for consumers.”

Based on the above plan performance, TJX raised its second quarter earnings estimate to between 52 and 53 cents a share from its May estimate of 47 cents to 50 cents a share.

●Costco Wholesale Corp., said its U.S. comparable store sales, excluding gasoline, rose 3%, below an expected 3.5% increase. Total revenue rose climbed 6% to $9.18 billion.

The company said its figures were hurt by the timing of Independence Day, since the holiday fell on the first Monday of the July reporting period and pre-holiday shopping had shifted to June. Strongest sales were in the Midwest and Northwest.

 

 

 

 

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