--June same-store sales prove a mixed bag
--High-end, value retailers do well
--Mid-tier, mass merchants struggle
(Updates throughout with new information)
By Karen Talley
U.S. shoppers showed restraint in June, unless they were
snapping up value-oriented merchandise or part of the upper
crust.
The lower and middle-markets, defined by department stores and
mass merchants, saw a growing trend catch up with them: their
customers are turning more frugal.
"There is a dichotomy," among retailers, said Nancy Liu, retail
strategist at Kurt Salmon. "If you're middle class, you're not
going to spend freely across stores because you're concerned about
money. This makes for a more competitive environment for
retailers."
June's winners included high-end retailer Nordstrom Inc. (JWN)
posting an 8.1% increase in same-store sales when 4.7% was
expected. The retailer said the best performing merchandise
categories included handbags, fashion and fine jewelry, and women's
shoes. The strongest regional performances for full-line stores
were in the South and Midwest. Sales results were consistent
throughout the month, with the final week the strongest.
Saks Inc. (SKS) reported a 6% rise when 4.7% was projected. The
retailer said strongest categories during the month included
women's shoes, men's private brand, tailored clothing and shoes,
and cosmetics and fragrances.
Off-price retailers also did well and were the only sector to
lift guidance expectations, demonstrating the continued propulsion
of the frugal consumer. TJX Cos. (TJX) posted a 7% increase in
same-store sales, topping expectations of 4.2%, with the company
saying customer traffic significantly increased in every division.
TJX lifted its second-quarter and full-year outlooks to 52 cents a
share to 53 cents a share, and $2.31 a share to $2.39 a share,
respectively. Ross Stores Inc. (ROST) reported same-store sales
increased 7% in June, beating analysts' expectations of 4.8%. The
company raised its second-quarter guidance to 77 cents a share to
78 cents a share amid above-plan sales and gross margin performance
in May and June.
Consumers also demonstrated that they will spend for something
special. Limited Brands Inc. (LTD) continued its streak, with the
operator of Victoria's Secret and Bath & Body Works posting
June same-store sales growth of 7%, more than double expectations
for a 2.4% gain. 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.
Otherwise, there were signs of stress, with those that did well
helping retailers edge past sales expectations for the month.
The 18 retailers tracked by Thomson Reuters reported a 2.5% gain
in June same store sales, the smallest monthly gain in almost three
years, and compared with 7.7% growth a year ago. The retailers are
up against the most difficult comparison in nearly five years, and
edged past expectations for 2.4% growth.
Target Corp. (TGT) reported same-store sales rose 2.1% in June,
near the low end of its expected range and below analysts'
expectations of 2.4%. Target said it remains on track to meet its
second quarter sales and earnings goals. Target said same-store
sales were strongest in its food and health and beauty segments,
while its home and hardlines divisions saw declines in same-store
sales. Regional performance was strongest in the Midwest and West
but below company average in parts of the South.
Fellow mass merchant Costco Wholesale Corp. (COST), a barometer
of goods ranging from food to apparel, reported U.S. same-store
sales excluding fuel rose 3%, when 3.5% was expected. The company
said it was hurt by the timing of Independence Day, given last year
the holiday fell on the first Monday of the July reporting period
and pre-holiday shopping was captured in June. Costco said regions
with the strongest sales included the Midwest and Northwest.
Mid-tier department stores had a tough time. Macy's Inc. (M) had
a rare miss, with same-store sales rising 1.2%, when 1.9% was
expected. The retailer cited a "stagnant at best" macroeconomic
environment and sales interruptions because of renovations at its
Herald Square store in New York City, the company's biggest.
Rival Kohl's Corp. (KSS) reported a 4.2% drop in
comparable-store sales, when a 3.2% decline was projected and said
it sees second quarter earnings per share coming in at the low end
of its previous guidance of 96 cents a share to $1.02 a share.
Chief Executive Kevin Mansell said he was "encouraged" by improved
sales in the latter part of the month as the retailer built
inventory.
"Macroeconomic issues continue weighing, making the consumer
more reluctant to spend," said Ms. Liu. "This is going to give
retailers pause for (the) back-to-school selling" period.
--Victoria Stilwell contributed to this article.
Write to Karen Talley at karen.talley@dowjones.com