Retailers posted mixed July sales results Thursday that topped
views, but were dragged down by misses from teen apparel chains
finding it tough to score good grades heading into the key
Sales of stores open at least a year rose 4.2% vs. a year
earlier, according to Ken Perkins, president of Retail Metrics.
Analysts had forecast a 4.1% gain.
But the results look better on the surface than they actually
were, says Perkins. He says a surprise comp gain of 6.3% from
giant drugstore chainWalgreen (
) gave the index a big boost of 80 basis points.
The tally without that boost is more reflective of what's
going on at retail, says Perkins.
He calls July a "soft" month that was more sluggish than
originally thought, leading more retailers to miss expectations
than exceed them.
Still, July was a "transitional" month, says Perkins. And
there were lots of summer clearances and early back-to-school
He says July proved to be a tough environment at the malls,
where traffic was weak, particularly in the apparel space.
"Income growth for mid- to lower-income consumers has been
almost nonexistent over the past year," Perkins said.
That's left this consumer segment with little discretionary
income, and spending on apparel is "getting crowded out" by
increased sales on housing, autos and durable goods.
Also, he adds, gas prices are up year over year, and the
payroll tax hike has impacted low- and middle-income consumers in
Michael Niemira, chief economist at the International Council
of Shopping Centers, calculates that retailers saw a 4.2% gain in
July comps vs. a year earlier.
Niemira is more upbeat about the month's showing.
"When you take out the drugstore component from Walgreen, it
looks softer than the last couple of months, but the last couple
of months were exceedingly strong," he said. "Despite the
relatively weak performance by some retailers, we actually had an
overall performance that was stronger in July than any month
Victoria's Secret's parentL Brands (
) was a standout. It reported a 3% gain in same-store sales vs. a
year ago, well ahead of forecasts for a 1.5% rise. It also raised
its Q2 earnings guidance Thursday.
But other retailers weren't so lucky.
Even industry leaderCostco Wholesale (
) fell short of views in July, posting a "decent" 4% rise in
comps from a year earlier, but shy of analyst forecasts for a
4.8% gain, Perkins says.
The giant warehouse-club operator saw strong traffic, but was
hurt by foreign-exchange translations and weak business in
categories like consumer electronics.
Sports retailerZumiez (
), which reported Wednesday, saw comps rise 0.8% vs. a year
earlier, missing forecasts for a 1.7% rise in comps for the
Teen apparel retailerBuckle (
) also missed. Its comps increased 2.1% from a year earlier vs.
an expected gain of 2.6% gain.
Apparel giantGap (GPS) reported a rare miss. Its July comps
were up 1% vs. a year earlier, short of views for a 1.6%
increase. Gap was up against a tough comparison with last year,
when it saw a 10% gain.
Back To School
The soft July showing and misses from Buckle and Zumiez follow
preannouncements from teen apparel retailersAmerican Eagle
Outfitters (AEO) andAeropostale (ARO) that Q2 comps and sales
were down quite a bit from a year earlier.
That has raised concerns about the back-to-school selling
season, which started in mid July.
"Given the relatively weak data coming from the teen apparel
retailers for the second quarter, the back-to-school selling
season could be even more challenging," said Perkins.
But Niemira sees it differently. "The worry level has
increased given the recent preannouncements," he said. "But you
have to be careful not to be so backward-looking and be mindful
that the economic picture is better than the last couple of
months. That would mean we should be a little more upbeat about