Compared to last year, U.S. retail same store sales (SSS) growth in June 2015 is expected to be sluggish. The supply chain is still working out the effects of February’s labor action at West Coast ports.
Overall, the Same Store Sales Index forecast for June 2015 is a gain of 0.7%. Excluding the drugstore sector, the SSS growth rate drops to 0.3%. Both are below the 4.0% result – in each category — recorded in June 2014. The 2015 outlook is also below the 3.0% growth rate considered healthy for consumer sales.
Labor talks between the International Longshore and Warehouse Union and the Pacific Maritime Association were resolved in February, but disruptions at West Coast ports was still cited as a factor in the 0.2 percent annual rate contraction of the U.S. economy in the first quarter of the year.
A number of promotions also affected the retail sector in June. Discounts increased throughout the month at Old Navy, which accounts for part of the weak 2.6% SSS estimate for the apparel group. However, Old Navy had tough comparisons as it posted a strong 7.0% SSS last June. L Brands, on the other hand, is seen as having managed inventories well in this promotional environment, and has one of the strongest June SSS estimates at 3.4%, well above last year’s 2.0% gain. Meanwhile, Stein Mart is on top with a 4.0% SSS estimate, topping last year’s 2.6% gain.
June marks the second month of the retail industry’s second quarter. Our Quarterly Same Store Sales Index, which consists of 75 retailers, is expected to post 1.3% growth for Q2 (vs. 1.4% in Q2 2014).
Exhibit 1 – June 2015 SSS estimates
Source: I/B/E/S estimates. Note: Aggregate mean data is revenue weighted. Note: Q2 2015 blended mean is a combination of Q2 estimates and actual SSS results.
Sector breakdown
The Discount sector has the most difficult comparisons from a year ago. The group has a 0.0% SSS estimate for June 2015, below the blistering 5.8% pace set in June 2014. Costco has a -0.1% comp estimate in the group, way below its 6.0% June 2014 result. The discounter is negatively affected by foreign exchange rates. Excluding the impact of gasoline sales, the Costco SSS figure rises significantly to 5.0%. Meanwhile, Fred’s has a 2.5% SSS estimate vs. a -0.6% posted in June 2014.
The Apparel sector also has weak estimates for June. Analysts expect the sector as a whole to report a 1.0% increase in SSS, compared to the 0.1% drop in SSS recorded in June 2014. Excluding Gap, one of the heaviest-weighted components in the sector, the Apparel group is set to improve at 2.8%, above the 2.1% result posted in June 2014. Stein Mart and L Brands have the strongest estimates in this group at 4.0%, and 3.4%, respectively. Meanwhile, Cato Corp. is expected to post the weakest result in the group at -1.0% SSS, while facing a 3.0% sales comparison from 2014. Gap Inc. is also expected to post a negative SSS at -0.5% for June 2014. Analysts expect the Gap Global division to have the weakest SSS within the company at -3.8%. On the flip side, its Old Navy Global division has a 2.6% SSS estimate.
Teen Apparel stores also appear to be a weak segment within the retail universe. Same store sales are expected to post a -1.7% comp. The Buckle is facing an easy 0.7% comparison from a year ago and is expected to post a -0.7% SSS, while Zumiez is expected to post a -3.4% SSS.
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