Concerned that top-line growth will slow to a crawl due to a convergence of several economic factors, Telsey Advisory Group cut its second-quarter same-store sales forecast for the department store sector by 50 basis points.

But Dana Telsey, chief executive officer and chief research officer, said in the report that J.C. Penney & Co. Inc. and Kohl’s Inc. were best positioned to deliver better-than-expected and in-line results.

Telsey said J.C. Penney’s comps “have the mojo,” adding that the firm’s second-quarter comparable store sales forecast is 4.2 percent, which compares with a 6 percent gain last year, but is “higher than the Factset consensus of 4 percent. We expect that J.C. Penney is in its best position in some time to reap the benefit of the back-to-school selling season.”

Posting stronger results by leveraging the b-t-s selling season would be quite a feat given several recent surveys and polls that show declining interest in consumers to stock shopping carts with b-t-s items.

For Kohl’s, Telsey sees higher traffic driving results. The firm has same-store sales pegged to show a 1.5 percent gain, which compares to a 1.3 percent gain in the second quarter of 2014 and in line with analysts’ consensus. “We believe that there are more levers this year that Kohl’s can pull, including efforts around personalization and loyalty, to drive traffic,” Telsey said.

Regarding the overall department store segment, Telsey said she is “concerned that sales results may again be a disappointment. Our caution about [second-quarter] comparable store sales results stems from” several factors including: “recent indications from certain branded apparel companies that the department store channel is showing slowing growth; growth in aggregate personal consumption expenditures of categories sold through department stores that showed a sequential deceleration of 150 bps in June, the most important month of [the second quarter]; and “tourist traffic and spending in key destinations that remains lackluster.”

Telsey said a shift in tax-free holidays for back-to-school is also cause for concern and “should negatively impact” the second quarter, but it would beneficial to the third quarter. Additionally, year-over-year comparisons are generally more challenging for retailers. Telsey said there are 63 tax-free days this year for the b-t-s season, which compares to 53 days last year. “What’s notable is that at least 92 percent of the days this year fall in [the third quarter] versus 53 percent last year, suggesting that [second quartter] will be negatively impacted, but [the third quarter] should see a benefit.”

Poised to see some bumps in the second quarter are Macy’s Inc. and Stage Stores Inc. Telsey cut Macy’s same-store sales estimates to 0.2 percent from a prior forecast of 0.7 percent. “Recently, there have been indications that the competitive retail environment intensified during [second quarter] due to the residual impact of the West Coast port delays that created excessive inventory along with lower tourism,” Telsey said.

With Stage Stores, the tax-free shift will likely impact results, which forced Telsey to reduce the second-quarter comps estimate to a gain of 1.3 percent, which is below the consensus estimate of 2.1 percent.

load comments
blog comments powered by Disqus