NEW YORK — As a transitional, low-volume and relatively insignificant month for retailers, July was equally unimportant to shoppers this year, even after some retailers tried to get a bigger share of the consumer wallet by rolling out back-to-school merchandise earlier.
Following sales that rebounded in June, July’s same-store sales, or sales at stores open at least a year, showed generally moderate gains for apparel retailers as consumers had varied reactions to fall merchandise, partly due to the month’s hot weather. Several specialty and luxury retailers posted some surprisingly low numbers. Lackluster sales generally continued at midtier department stores, as well.
In the luxury space, Neiman Marcus Group had an 8.8 percent July comp increase. Saks Fifth Avenue stores saw comps rise 4.1 percent, but rival Nordstrom Inc. reported a softer-than-usual 3.6 percent comp increase, despite its annual anniversary sale.
The specialty store channel showed the biggest mixture in July sales results. Both American Eagle Outfitters Inc. and Abercrombie & Fitch Co. reported strong double-digit results, up 17.1 percent and 22 percent, respectively, while Aéropostale Inc. and Old Navy came in with 4.2 percent and 5 percent declines, respectively. Banana Republic had a strong 7 percent gain; Talbots Inc. saw comps jump 11.3 percent; Gap Inc. saw comps drop 8 percent; and Ann Taylor Stores posted a consolidated 3.5 percent July sales decrease. United Retail Group’s Avenue stores watched comps soar 17 percent and Wet Seal Inc. had a 50.9 percent spike in comps.
“July is an unusual month because you have a fair amount of markdowns as retailers prepare for back-to-school product,” said Janet Hoffman, partner in Accenture Ltd.’s retail practice. “That can be a bit misleading.”
Given its relative insignificance to the year — especially this year, as early b-t-s selling was crimped due to the weather — July’s results shouldn’t be used to deduce any new sales trends, analysts said.
While she expects overall b-t-s sales to be “good,” Hoffman thinks “this year is going to be highly impacted by weather. I hate to use weather as a leading indicator, but I think that this year, given what we’ve seen this spring and last year, that it’s going to have an impact on how much buying happens in August.”
Mark Rein, senior manager with Capgemini’s global retail practice, remains upbeat on the b-t-s season. “It seems like the retailers that have a good handle on their operations have rotated out of summer and are making the switch to fall and back-to-school fairly effectively.”
Of the 50 retailers tracked by WWD, 31 posted positive same-store sales results in June, compared with 17 negative and two companies, Charming Shoppes and Christopher & Banks, with flat results. The specialty stores posted the highest aggregate increase, at 6.1 percent, while department stores had a 2.3 percent average monthly increase. Mass merchants posted a consolidated 2 percent July same-store sales increase.
According to the International Council of Shopping Centers, July same-store sales rose a softer-than-expected 3.6 percent — versus its prediction for a 4 percent rise — among the 71 chain retailers it tracks. The ICSC cited lower summer clearance inventories due the strong June, warmer weather and strong automobile sales. Comparatively, sales rose 5.2 percent in June, according to ICSC data.
Retail stocks took a beating in the day’s trading session among a broader market sell-off, which was fueled by concerns over high oil prices and, to a degree, the month’s sales results. The S&P Retail Index lost 2.2 percent on Thursday, closing at 472.01.
After Aéropostale’s weaker-than-expected drop in July sales, Eric Beder, equity analyst at Brean Murray & Co., downgraded shares of the company to “hold” from “strong buy,” lowered earnings estimates and suspended his $40 target price. Beder said in a report that “initial b-t-s offerings put the prospect for a sustained turnaround, even with easier comparisons, in jeopardy … We now believe Aéropostale will, at best, be in the penalty box with investors until there is tangible proof of a material turnaround.”
Aéropostale chairman and ceo Julian Geiger said in a statement that “while our ‘wear-now’ knits and denim categories are performing well, the initial performance of certain back-to-school merchandise, including sweaters, fleece and corduroy pants, has been significantly below our expectations.” The company subsequently lowered its second-quarter earnings-per-share guidance to 12 cents to 13 cents from a prior guidance of 16 cents to 19 cents.
J.P. Morgan Securities analyst Brian Tunick also lowered his second-quarter EPS estimate on Aéropostale to 13 cents from 17 cents. “Whether the company’s poor planning and inventory flows, or rather demand for its products, were the culprits for the weak [July] results, the company has a very short time frame to try to get its act together for the crucial back-to-school selling weeks,” Tunick wrote in a Thursday report.
Shares of Aéropostale fell 7.6 percent to $27.11 in Thursday trading on the New York Stock Exchange, approaching a 52-week low.
Meanwhile, Jeffrey Klinefelter of Piper Jaffray recommended that investors buy shares of New York & Co. Inc. and reiterated his outperform rating and $26 price target on the shares, despite the company’s 3.9 percent decline in July comps. The analyst said in a research report issued Thursday that he expects strong fall sales from the company.
Shares of New York & Co. dropped 4.8 percent in the day’s NYSE session, ending at $22.
On the positive side, analysts touted Talbots for showing that it is serious about turning around operations. The company, citing strong markdown selling, raised its second-quarter earnings outlook to 33 to 34 cents a share, up from a previous estimate for 32 cents.
Problems, however, continued in the moderate department store sector, with May Department Stores Co. posting a 3.3 percent decline in July comps and Federated Department Stores Inc. with a 0.9 percent decrease. Two standouts in the space were Stage Stores Inc. with an 11.1 percent July comp rise, and Gottschalks Inc. with a 5.8 percent comp increase.
“Department stores desperately need some intervention,” said Hoffman, citing the lack of fresh product department stores have when compared with specialty retailers. “The consumer is not pulled into the [department] store often enough for them to really have substantially higher sales.”