--July showing is mixed
--Target, Macy's solid
--Teen retailers weak
(Updates with added retailers' information throughout.)
By Karen Talley
Same-store sales for July were mixed for U.S. retailers, with
Target Corp. (TGT) and Macy's Inc. (M) showing strength, while teen
retailers like Wet Seal Inc. (WTSLA) and Buckle Inc. (BKE) had a
soft start to the back-to-school season.
July is a transitional month and sales are often the year's
second smallest, behind January. Like January, July is mostly a
time for clearance as retailers shift from summer merchandise to
back-to-school and fall apparel. It also is the last month of the
second quarter for most retailers.
"The month's results matter because they represent the latest
read on consumer spending patterns ahead of the very important
back-to-school selling period," said Charles Grom, retail analyst
from Deutsche Bank.
Average back-to-school spending for a person with school-age
children is projected to jump to $688 this year, according to a
National Retail Federation survey last month. That is up from $603
in last year's survey. Overall, spending for children ages 6 to 17,
or K-12, is expected to total $30.3 billion.
One-third of consumers in a Deloitte survey said they plan to
spend more on back-to-school merchandise this year, but not because
they are feeling magnanimous. More than half cite higher prices as
their reason for doing so. Many respondents believe the economy is
in a recession, with food prices, higher energy prices and the job
market primary concerns, the Deloitte survey said.
"Given the uncertain macro backdrop and several data points
indicating recent global slowdown in Europe and Asia, expectations
are low," said Randal Konik, retail analyst at Jefferies &
Co.
Target posted a 3.1% rise in same-store sales, when 2.7% was
expected. The solid number came amid "a consumer environment that
remains quite challenging," Chief Executive Gregg Steinhafel
said.
Macy's same-store sales grew 4.1% when 3.2% was projected.
"Despite some challenges from a sluggish macroeconomic environment
and a temporary disruption of sales from the remodeling project at
our Herald Square flagship store in New York City, the spring
season met our expectations," Chief Executive Terry Lundgren
said.
Kohl's Corp. (KSS) had its first comparable-store sales growth
in four months, posting a 1.7% gain when expectations were for a
flat showing. "We have made significant progress in improving
inventory levels as we enter the back-to-school season and believe
we have the appropriate mix of both basics and fashion," said Chief
Executive Kevin Mansell. By line of business in July, men's was the
strongest category for a second consecutive month, women's was
essentially flat and children's was slightly negative.
Gap Inc. (GPS) posted a strong 10% increase in July same-store
sales, when a 3.8% rise was expected. All three North American
brands--Gap, Banana Republic and Old Navy--reported growth while
international comparable-store sales grew 4%, exceeding
expectations for a 1.6% drop.
Off-price retailer TJX Cos. (TJX) posted a 7% increase in
same-store sales ahead of expectations for 5%, and raised its
second-quarter and full-year earnings per-share guidance.
Among upper-end retailers, Saks Inc. (SKS) reported a 3.5% rise
when 4% was expected, and Nordstrom Inc. (JWN) posted a 0.9% gain
when a 2.7% decline was projected.
Limited Brands Inc. (LTD) reported a comparable-store sales
increase of 12%, when 6% was expected and raised its earnings
expectations for the second quarter. The operator of Victoria's
Secret and Bath & Body Works also declared a $1 special
dividend.
Costco Wholesale Corp. (COST), which reported Wednesday, posted
8% growth in U.S. same-store sales when gasoline sales are backed
out. Analysts were looking for 4.7%.
The 18 retailers tracked by Thomson Reuters are expected to show
3.1% same-store sales growth for July. The figure compares with
4.8% growth last year.
Zumiez Inc.'s (ZUMZ) July same-store sales grew 7.5%, when an
8.5% increase was expected. The retailer, which sells apparel
designed for action sports like snowboarding and skateboarding, has
seen its earnings and revenue grow in recent quarters. But its June
same-store sales also came in just shy of analysts'
expectations.
Fellow teen retailer Buckle posted a 0.1% drop in same-store
sales when a 1.2% decline was expected. And Wet Seal posted a 15.6%
drop in same-store sales when a 14% fall was expected. "The second
quarter ended with weak July sales results," Wet Seal Chairman Hal
Kahn said. "We believe the company's performance in recent quarters
is due in part to a move away from some of our fast fashion
merchandising practices at Wet Seal that had been successful in the
past."
"It's too early to say the misses mean a bad back-to-school, but
it's not a cause for optimism," said Joel Bines, head of the retail
practice at AlixPartners.
-Anna Prior contributed to this article.
Write to Karen Talley at karen.talley@dowjones.com
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