Lower traffic and a heightened promotional environment led most reporting retailers to fall short of analysts’ estimates in July. Same-store sales projections for the month had been expected to come in at a 4.4 percent gain, according to Thomson Reuters. Most stores failed to meet that number, with the average coming in at 3.9 percent, leading some to reduce earnings estimates for the second quarter.
The results shouldn’t lead to panic, however, since July is “a transitional month,” said Barbara Kahn, director of the Baker Retailing Center and a professor at the Wharton School of the University of Pennsylvania, and the “hope is for a pickup in August and that back-to-school will spur people to go to the malls. June was a strong month and the hope is that July would be as well,” she said.
Instead, Kahn said that business in July seemed to be “more promotional than anticipated,” and the economic picture continues to be spotty. “Everybody is looking for a clean indicator that things are fine, but the recovery is just sluggish,” she said.
Michael Brown, a partner in the consumer retail group of management consultancy A.T. Kearney, characterized July as “lackluster,” with most retailers reporting “conservative small gains.” But he cautioned July is a “less important month” with many people taking vacations and the Fourth of July holiday, and he’s “conservatively optimistic” about August sales for the b-t-s selling period. “There’s enough positive consumer sentiment that I think we’ll see slightly positive numbers,” he said, pointing to good consumer confidence, modest economic growth and the small gains posted by most retailers. “There’s nothing in the market to say the consumer won’t be out there shopping,” he said. The quest for promotions is expected to continue as consumers seek value when they do hit the stores.
In July, American Apparel Inc. was seemingly the only retailer to buck the lackluster trend with a comparable-store sales jump of 8 percent, which encompassed a 6 percent increase in retail-store sales and a 23 percent spike in online sales. “July represents our 26th consecutive month of positive comparable store sales growth,” said Dov Charney, chairman and chief executive officer, noting it came on top of a 19 percent increase in July of last year. “As we enter August, we anticipate continued strength in our sales channels and we are looking forward to the back-to-school, Halloween and holiday selling season,” he said.
Among the other stores still reporting, Gap Inc. said comparable-store sales for July rose 1 percent overall, compared with a 10 percent gain in July 2012. Comps for the second quarter overall rose 5 percent versus 4 percent last year.
By division, the Gap stores posted a 7 percent increase on top of a 10 percent gain last year, while Banana Republic’s comps fell 1 percent and Old Navy dropped 5 percent. In the quarter, Gap and Old Navy were both up 6 percent while Banana fell 1 percent.
In a conference call, the company called the second quarter “somewhat uneven,” with May and June outperforming the “small, largely clearance month” of July. Customer response to summer product at both Gap and Old Navy was strong in the period, it added.
Within the teen sector, The Buckle Inc. outperformed most of its competitors by posting a 2.1 percent comp increase in July and 3.2 percent in the second quarter. Zumiez Inc. had a 0.8 percent comp gain in the four weeks ended Aug. 3, driven by an increase in dollars per transaction. Hard goods, juniors and footwear had a positive performance, the company said, while men’s, boys’ and accessories were down. July will be the final month that the Washington-based retailer will report same-store sales.
Aéropostale Inc., while not disclosing sales for the month of July, said comp-store sales in the second quarter dropped 15 percent. It now expects losses in the second quarter to be in the range of 42 to 44 cents a diluted share, which includes charges of 19 cents a share not included in the company’s original estimates. It blamed the poor showing on increased promotional activity and weak traffic in the period, particularly July. Thomas P. Johnson, ceo, said he is hopeful that the company’s move to “reposition the Aéropostale brand” to make it “more fashionable and relevant,” will connect with customers and help the New York-based chain regain market share.
L Brands Inc. weighed in with a 3 percent gain in the four weeks and a 2 percent increase for the second quarter, prompting the parent of Victoria’s Secret and Bath & Body Works to raise guidance for second-quarter earnings to 60 cents a share, from 50 to 55 cents a share. By division, Victoria’s Secret stores had a 2 percent comp-store sales gain in the month and a 1 percent increase in the second quarter driven by strong sales of lingerie and the Pink collection and the introduction of the Body by Victoria bra and the Victoria fragrance. Victoria’s Secret Direct posted an 11 percent decline in comps in July and a 6 percent decrease for the second quarter due to a double-digit decline in apparel sales.
Bath & Body Works posted a 6 percent comp-store gain in July and 3 percent in the second quarter with the brand’s signature collection, home collection and soap and sanitizer offerings spurring sales. The La Senza division posted a 9 percent comp gain in July and 2 percent in the second quarter.
The company said it is expecting low-single-digit comp increases in August.
Cato Corp. reported comps declined 5 percent in July and 2 percent in the second quarter, prompting the Charlotte, N.C.-based retailer to bring down estimates for earnings per share in the second quarter to 42 to 48 cents, a decline of 19 to 29 percent from the 59 cents posted last year. “July same-store sales reflect the continuing economic uncertainty and the related volatility we have seen throughout much of the year,” said John Cato, chairman, president and ceo of the 1,306-unit chain.
Stein Mart Inc. reported comps rose 3.7 percent in July and 6.4 percent in the second quarter with dresses and intimate apparel performing best. Women’s special sizes and casual sportswear, jewelry and men’s sportswear “were more challenged,” the company said. Geographically, July sales were strongest in Florida, the Southeast and Virginia, while sales in the West were slightly lower. Jay Stein, ceo, said: “Our customers responded well to our merchandise assortment during the first half of the year and we are looking forward to introducing her to our great fall assortment.”
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