Summertime and the livin’ is easy … but not for the retail industry. It seems as if everyone is at the beach or the lake as the Same Store Sales Index for July is expected to grow just 0.1% — essentially flat. Excluding the Drug Store sector, things look even worse: the SSS growth rate falls to -0.5%. That wasn’t the picture in July a year ago, when the overall SSS Index gained 4.5% and ex-drug, 4.4%.
As the summer break continues, students are on vacation and mall traffic has slowed down. Back to school shopping hasn’t started yet, since the Labor Day weekend is one week later this year and students and parents usually wait until the very last minute. However, August and September are likely to receive a boost from these sales. Moreover, when students return to school, they often eye what their classmates are wearing and hit the malls to buy the latest fashions.
Additionally, retailers are facing difficult comparisons from a year ago. As a result, July SSS results are significantly weaker. Teen retailer Zumiez is expected to post the weakest SSS result at -4.1%. Another mall store that is suffering from weak sales is Gap with a -2.3% SSS estimate.
Meanwhile, L Brands labels and merchandise continue to resonate well with shoppers and have created a loyal following. As a result, L Brands has one of the strongest July SSS estimates at 2.3%, but below last year’s 6.0% gain. Meanwhile, Stein Mart is on top with a 3.5% SSS estimate, topping last year’s 0.8% gain.
July marks the last month of the retail industry’s second quarter, and retailers are expected to report results in the next few weeks. 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. July 2015 SSS estimates
Source: I/B/E/S estimates. Note: Aggregate mean data is revenue weighted.
Sector by sector
The Discount sector is facing one of the most difficult comparisons from a year ago. The group has a -0.5% SSS estimate, below the 4.9% pace set in July 2014. Costco has a -0.6% comp estimate in the group, below its 5.0% July 2014 result. This discounter is negatively affected by foreign exchange rates. Excluding the impact of gasoline sales, the Costco SSS figure rises significantly to 6.2%. Meanwhile, Fred’s has a 1.5% SSS estimate vs. 0.7% posted in July 2014.
Analysts expect Apparel as a whole to report a -0.3% SSS, compared to the 3.4% gain in SSS recorded in July 2014. Excluding Gap, one of the heaviest-weighted components in the sector, the Apparel group is set to improve at 2.0%, below the 5.0% result posted in July 2014. Stein Mart and L Brands have the strongest estimates in this group at 3.5%, and 2.3%, respectively.
Meanwhile, Gap is expected to post the weakest result in the group at -2.3% SSS, vs. 2.0% sales comparison from 2014. Its Gap Global division is expected to post the weakest SSS at -6.7% for July 2014. On the flip side, its Old Navy Global division has a 3.8% SSS estimate. Usually, the division is Gap’s strongest during the back-to-school season. Meanwhile, Cato Corp. is looking at a flat SSS estimate.
Apparel stores catering specifically to teens have the weakest estimates within the retail universe. Same store sales are expected to post a -1.4% comp for the sector. The Buckle is facing an easy 0.5% comparison from a year-ago and is expected to post a 0.2% SSS, while Zumiez is expected to post a -4.1% SSS.
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