The July retail sales picture is becoming clearer and the best to be said was that it wasn’t quite as bad as first thought. Nevertheless, no one would call it a strong selling month. The Same Store Sales Index actual result for July 2015 registered a small gain of 0.4%, but that beat the earlier estimate of a 0.1% increase. Excluding the drug stores, the index recorded a -0.1% comp, exceeding the -0.5% estimate.
These results are not quite final, since Gap will report July SSS on Aug. 10. So far, 63% of retailers have missed estimates. Those that faced difficult comparisons from a year ago posted weaker-than-expected results. Moreover, mall traffic is weak this summer and shoppers are on vacation.
If there was a winner in July it was clearly L Brands, beating expectations of a 2.3% gain with a 3.0% SSS result. Its Bath & Body Works division was the strongest at 4.0%, and its Victoria’s Secret merchandise continues to resonate well with customers.
On the flip side, Costco posted flat SSS, and is being hurt by lower-priced gasoline sales. Excluding fuel, Costco posted a robust 7.0% SSS, above last year’s 6.0% SSS result. Meanwhile, teen retailers are struggling as students are on vacation and haven‘t started their back-to-school shopping yet.
Back-to-school sales are expected to pick up in late August and September just when school starts. Shoppers like to procrastinate, and a later Labor Day weekend will drive shoppers to the mall a week later this year. Looking forward to Q2, our Quarterly Same Store Sales Index, which consists of 75 retailers, is expected to post 1.1% growth for Q2 (vs. 1.4% in Q2 2014).
Exhibit 1. Performance — Overall and Compared to Expectations
Sector breakdown
Costco has the biggest weighting in the Discount sector, and its flat SSS brought the overall sector down. For July, the Discount sector also posted a flat SSS, above its -0.5% final estimate. Excluding gasoline sales, Costco’s SSS improves to a robust 7.0%, above expectations. Meanwhile, Fred’s missed its 1.5% same store sales estimate, with a 0.7% comp.
Apparel registered a -0.5% SSS in July, missing its final estimate of -0.3%. Gap will report results on Aug. 10. However, Gap is expected to post the weakest result within the group at -2.3%, below last year’s result of 2.0%. Meanwhile, L Brands posted the strongest result in our retail universe at 3.0%, followed by Stein Mart at 0.2%.
For July, Teen Apparel was the weakest segment within the retail universe. The sector registered a -7.9% SSS for July, below its -1.4% final estimate. The Buckle missed its final estimate of 0.2%, and reported a -8.1% comp. Meanwhile, Zumiez posted a -7.6% SSS, below its -4.1% final estimate.
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