By Anna Prior
Retailers, particularly those that cater to teenagers, had a
difficult start to the second half of the year and critical
back-to-school season, as July sales came in below
expectations.
"Mall traffic trends overall were just weak in July," said
Barclays specialty retail analyst Matthew McClintock, adding the
month was highly promotional as retailers tried to entice what
shoppers there were.
Although retailers are still clearing through some leftover
spring clearance inventory, July offers the first look at how the
companies are faring in the back-to-school season, which can
typically be an indicator of holiday performance.
While retailers posted strong results last year for July and
back-to-school, this year is a different story.
Average back-to-school spending for a person with school-age
children is projected to fall to $634.78 this year, according to a
National Retail Federation survey last month. That's down from
$688.62 in last year's survey. Overall, spending for grades K-12 is
expected to total $26.7 billion, compared with $30.3 billion last
year.
The nine retailers tracked by Thomson Reuters were expected to
show 3.9% growth in July same-store sales, or sales at stores open
more than a year, versus 6.4% growth a year earlier. So far, eight
of the companies have reported and posted 3.7% growth.
A number of companies, including the major department stores,
have stopped reporting monthly results over the past year, making
it more difficult to get a snapshot of the entire industry. Gap
Inc. (GPS) is slated to report after the market closes.
Costco Wholesale Corp. (COST) reported July same-store sales
rose 3%, excluding gas, below expectations for 5.3% growth.
Electronics sales were weak due to softer sales in televisions,
cameras and computers, the company said. However, lawn and garden,
automotive, and office supplies were among the stronger performing
groups. Top-performing regions included the Southeast, Texas and
the Midwest.
Among teen retailers, Zumiez Inc. (ZUMZ) posted a 0.8% rise in
same-store sales, missing expectations for 1.7% growth, while
Buckle Inc. (BKE) recorded a 2.1% increase in same-store sales,
just short of expectations for 2.3% growth.
Both misses came amid second-quarter warnings this week from two
other teen retailers that don't report monthly sales
results--American Eagle Outfitters Inc. (AEO) and Aeropostale Inc.
(ARO)--indicating that the important back-to-school season may be
tough for teen retailers.
Last year, apparel retailers in particular were helped by strong
demand for the then-new color trend, particularly brightly colored
and patterned denim.
"The bright palette lifted results strongly beginning as early
as July last year," said Stifel Nicolaus analyst Richard Jaffe.
"This year, we don't have a single strong trend like that and now
the apparel retailers have to come up against tough
comparisons."
Bucking the downbeat trend, however, was L Brands Inc.
(LTD)--formerly Limited Brands--which posted 3% same-store sales
growth last month, compared with expectations for 1.5% growth. The
company also raised its earnings guidance for the second
quarter.
Of L Brands' units, Victoria's Secret recorded a 2% increase in
same-store sales, topping expectations for a 1.4% increase. Growth
was due in part to strength in lingerie and the young-adult focused
Pink brand, the company said.
Meanwhile, Bath & Body Works reported 6% growth in
same-store sales, well ahead of expectations for 0.5% growth,
thanks to the performance of the brand's signature collection, home
fragrance and soap and sanitizer businesses. And La Senza reported
9% same-store sales for July, when 1.4% growth was expected.
Fred's Inc. (FRED) reported 2.5% growth in July same-store
sales, topping expectations for growth of 1.5%. Both general
merchandising and the pharmacy departments contributed equally to
the month's same-store sales increase, Chief Executive Bruce Efird
said.
Write to Anna Prior at anna.prior@wsj.com
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