After four weeks of declining weekly sales, the kickoff of the back-to-school shopping season bolstered results for the week ended July 30, according to The Retail Economist-Goldman Sachs Weekly Chain Store Sales Index — which rose 0.3 percent compared to the prior week.
Meanwhile, a separate report from Telsey Advisory Group showed a jump in retail traffic for July, which could help boost same-store sales for the month, which are reported this Thursday.
On a year-over-year basis, the Retail Economist-Goldman Sachs index showed a 2.5 percent gain and Michael P. Niemira, chief economist of The Retail Economist LLC, said that a “combination of hot weather driving summer clearance and some state-tax holidays getting the consumer to focus on back-to-school shopping helped to lift sales over the past week.”
Niemira also noted that “discounters and wholesale clubs aided the sales pickup, in particular, over the past week.” The economist expects b-t-s sales to rise 2.5 percent in the July through September period, which is “nearly identical with the 2.6 percent gain during the 2015 season,” he said adding that his forecast is based on U.S. Census Bureau data for “electronics, family clothing, books and shoe store sales.”
In the July sales preview report, Dana Telsey, chief executive officer and chief research officer of Telsey Advisory Group, said traffic was maintaining momentum from June “when comps were generally better than expected, as weather normalized and as consumer confidence remained elevated.” This follows a drop in retail traffic earlier this year, which forced retailers to adjust their sales and earnings outlooks. And from an investment perspective, Telsey said there is at least one retail segment worth eyeing.
“While we see potential for improving top-line trends, outlooks were adjusted and set after the first quarter, in the midst of what looks to have been a trough in retail traffic,” Telsey said. “However, despite the rebound in share prices, valuations remain reasonable in our view across the specialty store space, with the group average in line or slightly below three-year historical multiples.”
Tesley explained that annual outlooks “were in some cases adjusted downwards at what could have been a traffic trough in mid-May. Furthermore, comp and gross margin compares remain somewhat benign, particularly as we begin to anniversary incremental product costs associated with the west coast port slowdown last year.”
The analyst also noted that while the current market cycle “tends to be promotional as retailers clear the way for back-to-school floor sets, we see more potential for comp upside rather than downside risk for the month of July.”