August retail sales – as expected – showed the effects of slow mall traffic and comparisons with very strong August results a year ago. The Thomson Reuters Same Store Sales Index actual result for August 2015 showed a decline of -0.5%, missing its final estimate of -0.2%. Excluding drug stores, the index registered a -1.0% comp for August, matching its final estimate.
In August, 2014, the index registered a powerful 4.8% gain, rising to 5.0% ex-drug. The 2015 results are not quite final, due to the later Labor Day weekend. Zumiez will report August SSS on Sept. 10.
However, it’s a dismal picture. So far, 71% of retailers missed estimates. Costco has the biggest weighting in our retail index. As a result, its -2.0% SSS result dragged the index down. The retailer was hurt by foreign exchange rates driven by a stronger dollar, and lower year-over-year gasoline prices. Excluding gas, Costco posted a robust 5.0% SSS, but still below last year’s 8.0% SSS result.
Analysts polled by Thomson Reuters are also expecting a weaker back-to-school season than last year. Nonetheless, L Brands was the clear winner for August. The retailer beat expectations of 2.4% with a 6.0% SSS result. Both its Bath & Body Works and Victoria Secret divisions were strong at 5.0% and 6.0% gains, respectively. On the flip side, Gap posted a -2.0% SSS, but its Old Navy division was strong at 6.0% SSS. Meanwhile, teen retailers are struggling as parents are spending less than last year.
Parents did take advantage of the tax-free holidays that took place in August vs. July last year. Retailers are hoping that the shift in Labor Day weekend will boost September retail sales. Looking forward to Q3, our Thomson Reuters Quarterly Same Store Sales Index, which consists of 83 retailers, is expected to post 1.6% growth for Q3 (vs. 1.7% in Q3 2014).
Exhibit 1. Performance — Overall and Compared to Expectations
Sector by sector
Costco has the biggest weighting in the Discount sector, and its -2.0% SSS brought the overall group down. For August, the Discount sector posted a -1.9% SSS, slightly below its -1.8% final estimate. Excluding gasoline sales, Costco’s SSS improves to a robust 5.0%, but still below expectations. Meanwhile, Fred’s beat its 0.8% same store sales estimate with a 1.2% comp.
The Apparel sector registered a 0.9% SSS in August, matching its final estimate. Gap missed its flat estimate and posted a -2.0% SSS. Likewise, Stein Mart posted a -1.4% comp, below its 2.5% SSS estimate. Meanwhile, L Brands posted the strongest result in our retail universe at 6.0%, followed by Cato Corp. at 4.0%.
For August, Teen Apparel was the weakest segment within the retail universe. The sector registered a -3.5% SSS for the month, below its -2.7% final estimate. The Buckle missed its final estimate of -2.0%, and reported a -3.3% comp. Meanwhile, Zumiez is expected to post the weakest result within the group at -3.9%, below last year’s result of 2.0%.
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