Same-store sales for July are coming in mixed for U.S.
retailers, with Limited Brands Inc. (LTD) once again beating
estimates, while teen retailers like Wet Seal Inc. (WTSLA), Zumiez
Inc. (ZUMZ) and Buckle Inc. (BKE) had a soft start to the
back-to-school season.
July is a transitional month and sales are often the year's
second smallest, behind January. Like January, July is mostly a
time for clearance as retailers shift from summer merchandise to
back-to-school and Fall apparel. "The month's results matter
because they represent the latest read on consumer spending
patterns ahead of the very important back-to-school selling
period," said Charles Grom, retail analyst from Deutsche Bank.
Average back-to-school spending for a person with school-age
children is projected to jump to $688 this year, according to a
National Retail Federation survey last month. That is up from $603
in last year's survey. Overall, spending for children ages 6 to 17,
or K-12, is expected to total $30.3 billion. One reason for the
bump is that this year will see the most children entering
elementary and middle schools since 2008.
And one-third of consumers in a Deloitte survey said they plan
to spend more on back-to-school merchandise this year, but not
because they are feeling magnanimous. Over half cite higher prices
as their reason for doing so. Many respondents feel the economy is
in a recession, with food prices, higher energy prices and the job
market primary concerns, the Deloitte survey said.
"Given the uncertain macro backdrop and several data points
indicating recent global slowdown in Europe and Asia, expectations
are low," said Randal Konik, retail analyst at Jefferies &
Co.
Limited Brands reported a comparable-store sales increase of
12%, when 6% was expected and raised its earnings expectations for
the second quarter. The operator of Victoria's Secret and Bath
& Body Works also declared a $1 special dividend.
Regional department store Stage Stores Inc. (SSI) reported
same-store sales rose 5.3% in July, when 2.2% was expected. The
company said most merchandise categories recorded increases, with
accessories, cosmetics, home and gifts, misses sportswear and young
men's all surpassing the company average. The retailer, which
operates names including Bealls, Goody's and Palais Royal, added
that the Northeast, Mid Atlantic, South Central and Southwest
regions all outperformed. July performance benefited from increased
average transactions, said Chief Executive Michael Glazer, adding
that the company feels "good" about merchandise assortments and
marketing plans coming into the back-to-school shopping season.
Costco Wholesale Corp. (COST), which reported Wednesday, posted
8% growth in U.S. same-store sales when gasoline sales are backed
out. Analysts were looking for 4.7%.
The 18 retailers tracked by Thomson Reuters are expected to show
3.1% same-store sales growth for July. The figure compares with
4.8% growth last year.
Zumiez's July same-store sales grew 7.5%, when an 8.5% increase
was expected. The retailer, which sells apparel designed for action
sports like snowboarding and skateboarding, has seen its earnings
and revenue grow in recent quarters. But its June same-store sales
also came in just shy of analysts' expectations.
Buckle Inc. posted a 0.1% drop in same-store sales when a 1.2%
drop was expected. And Wet Seal Inc. posted a 15.6% drop in
same-store sales when a 14% fall was expected. "The second quarter
ended with weak July sales results," Wet Seal Chairman Hal Kahn
said. "We believe the company's performance in recent quarters is
due in part to a move away from some of our fast fashion
merchandising practices at Wet Seal that had been successful in the
past."
"It's too early to say the misses mean a bad back-to-school, but
it's not a cause for optimism," said Joel Bines, head of the retail
practice at AlixPartners.
--Anna Prior contributed to this article
Write to Karen Talley at karen.talley@dowjones.com
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