Retailers earned a good report card from shoppers in August,
with sales gains that handily beat forecasts Thursday as tempting
deals and an improved economic picture prompted consumers to
ratchet up spending for back to school.
August sales at stores open at least a year rose 5% vs. a year
earlier, according to Ken Perkins, president of Retail
The showing topped analysts' forecasts for a 4.2% gain.
),L Brands (
) andRite Aid (
) all beat views but a key retailer, Gap, missed. The overall
solid results for August, combined with recent comments from
retailers, bode well for this year's back-to-school season.
"Based on our store checks, it looks like the back-to-school
season is shaping up to be a decent one," Perkins told IBD. "The
month was a solid one, driven by back-to-school event shopping
and improved consumer confidence that's reflective of an improved
Perkins says retailers' back-to-school commentary generally
has been positive, citing firms such as giant department store
operatorMacy's (M), clothing retailerUrban Outfitters (URBN) and
off-price retail operatorTJX Cos. (TJX) as among those that gave
good initial reads on back to school when reporting their
"That is important and indicative of it not being what it was
last back to school, which was very difficult," Perkins said.
"With all the positive commentary around back to school, it's
cause for some hope that the (retailers') third-quarter earnings
and comps will show improvement from the second quarter," Perkins
Perkins said consumers are still "event driven" in their
shopping, and August same-store sales were fueled largely by
Helping to lure back-to-school buying were aggressive
promotions, says Perkins, with plenty of good deals in the
Promotions were on par with last year, he adds, but retailers
aren't hitting the panic button.
He says retailers' inventories are in better shape than they
were last year. Retailers are carrying less inventory, resulting
in their not having to run fire sales to get rid of excess
A brighter employment picture has led to improved consumer
confidence, which also helped retailers during the month, adds
Michael Niemira, consultant for the International Council of
Shopping Centers, calculates a 4.8% gain in August same-store
sales vs. a year earlier.
Niemira's tally includes nine retailers. Based on that, the
August results reflect an "underlying pickup in consumer demand,"
which started in April, he said.
"This slice of reporting firms paints a picture of improvement
in overall spending of about one percentage point from the same
time last year," he added. "For me, it says the back-to-school
performance was probably pretty good."
In the apparel space, Victoria's Secret parent L Brands saw a
5% increase in August same-store sales, sailing past estimates
for a 2.8% gain.
Perkins says the apparel retailer's healthy showing is
somewhat reflective of a strong 5% same-store sales increase in
August at Victoria's Secret.
Gap Misses Mark
But top apparel retailerGap (GPS) fell short of views. It
posted a 2% decline in August same-store sales vs. a year earlier
after the close. That compares with estimates for a 1.7% rise.
The miss sent its shares down in after-hours trading.
By company segment, Gap's Old Navy brand saw the best showing
with a 2% rise in August same-store sales. But it fell short of
views, says Perkins.
Still, Perkins says Old Navy is a good back-to-school
It offers a "good value proposition to many moderate-income
consumers," with low prices on jeans and other clothing for kids,
He says action-sports retailer Zumiez is also well positioned
for back to school. Zumiez posted a 2% rise in August same-store
sales after the close vs. estimates for a 1.7% gain. It was its
seventh straight monthly upside surprise.
Perkins calls Zumiez "very niche-oriented," with plenty of
products you won't find in other stores.
Warehouse club powerhouse and typical top retail performer
Costco Wholesale led the pack in August same-store sales -- up a
hefty 7% vs. a year earlier, ahead of views for a 4.9% gain.
It had the most impressive showing of the month, Perkins
U.S. core same-store sales, excluding the negative impact from
gasoline price deflation and the foreign exchange, rose 7% as
Perkins says that in August, Costco was a destination for
electronic items as well as for back-to-college shopping.
Giant drugstore operatorWalgreen (WAG) saw a 3.7% gain in
same-store sales for the month, missing views for a 4.4%
Rival Rite Aid posted a 3.9% rise in August same-store sales,
topping forecasts for a 3.3% increase.
Regional discount chainStein Mart (SMRT) posted a 2.5%
increase in same-store sales for the month, short of views for a
Teen-apparel retailerBuckle (BKE) also missed forecasts, with
a 0.8% increase in August same-store sales vs. estimates for a
Specialty apparel retailer Cato saw a 3% increase in
same-store sales for the month, ahead of estimates for a 2%
Niemira said the driver of August's healthy showing was a
combination of the improvement in the labor markets, which is
"continuing to make its way through the economy and through the
Overall, Niemira says, the state of the consumer is much
improved from earlier in the year and even a year ago.
The overall improvement in spending in August was in the
nonauto and auto segments, he says.
"It's broad based," he added. "When you see broad improvement
in spending trends, it tends to be driven by the economy."
Added Perkins: The August showing "offers a glimmer of hope to
retailers that the consumer is turning the corner."
Perkins noted that two recurring themes among retailers in
their earnings reports were a "challenging retail environment and
an uncertain economic outlook."
Perkins says he agrees with the comments about the environment
"It has been and will remain highly competitive and very
promotional, which will continue to pressure margins," he
Niemira expects the overall back-to-school season, which runs
from late July through mid September, to be the strongest since
He sees September same-store sales increasing 4% to 5% vs. a
year earlier, driven by continued healthy apparel demand.
Electronics is another strong category for back to school, he
The back-to-school season is said to be a precursor to
retailers' Christmas holiday season performance.
"The implication from the back-to-school season is positive
for a good performance for the holiday season too," Niemira