August weather may have been hot, but the malls were stone cold as several factors converged to make it a challenging month for retail sales. The Thomson Reuters Same Store Sales Index for August 2015 is forecast to show negative growth of -0.2%. Excluding the Drug Store sector, the SSS growth rate falls to -1.0%. A year ago, the overall SSS growth rate was 4.8%, rising to 5.0% ex-drug. What happened this year?
There are three identifiable factors. First, Labor Day falls on the latest possible date, Sept. 7, so the back to school season is stretching into the first week of September. Parents who are last-minute shoppers weren’t feeling the pressure in August.
Second, retailers with significant sales abroad felt the effect of a strong U.S. dollar when repatriating those revenues. Third, stores that sell gasoline, such as Costco, saw profits plunge as the price of oil – and the price at the pump — declined.
Since August 2014 was so strong, retailers are facing difficult comparisons from a year ago. Teen retailers Zumiez and The Buckle are expected to post the weakest SSS results at -4.2%, and -2.0%, respectively. Another mall store that is suffering from weak sales is Gap with a -0.2% SSS estimate. Meanwhile, Rite Aid and Stein Mart are on top with a 3.1%, and 2.5% SSS estimates.
Costco has the biggest weighting in our index, and is expected to post a -1.9% SSS. Excluding Costco, the SSS Index improves to a 1.9% growth rate.
The late Labor Day is expected to help September sales, as parents and students get moving on back to school clothes and supplies. What’s more, students that have already returned to school are eyeing what their classmates are wearing and will return to the malls to buy the latest fashions.
Exhibit 1. August 2015 SSS estimates
Source: I/B/E/S estimates. Note: Aggregate mean data is revenue weighted.
Discounters are facing some of the most difficult comparisons from a year ago. The group has a -1.8% SSS estimate, below the 6.9% pace set in August 2014. Costco has a -1.9% comp estimate in the group, below its 7.0% August 2014 result. The discounter is negatively affected by foreign exchange rates, among other factors. Excluding the impact of gasoline sales, the Costco SSS figure rises significantly to 5.5%. Meanwhile, Fred’s has a 0.8% SSS estimate vs. a 2.3% posted in August 2014.
Analysts expect the Apparel sector as a whole to report a 0.8% SSS, compared to the 0.9% gain recorded in August 2014. Excluding Gap, one of the heaviest-weighted components in the sector, the Apparel group is set to improve at 2.1%, below the 4.3% result posted in August 2014. Both Stein Mart and L Brands have the strongest estimates in this group at 2.5%. Meanwhile, Gap is expected to post the weakest result in the group at -0.2% SSS, vs. -2.0% sales comparison from 2014. Its Gap Global division is expected to post the weakest SSS at -3.4% for August 2014. On the flip side, its Old Navy Global division has a 3.8% SSS estimate. Usually, Old Navy Global is Gap’s strongest during the back-to-school season.
Teen Apparel stores have the weakest estimates within the retail universe. Same store sales are expected to post a -2.8% comp for the sector. The Buckle is facing an easy 0.8% comparison from a year-ago and is expected to post -2.0% SSS, while Zumiez is expected to post a -4.2% SSS.
Receive stories like this to your inbox as they are published. Subscribe here and follow us @Alpha_Now on Twitter. If you are looking to access our data or analytics, register for a free trial.
