June same-store sales outpaced Wall Street estimates and rose by 6.5 percent, according to the Thomson Reuters Same-Store Sales Index. Analysts had been expecting a gain of 4.9 percent.
June typically is a clearance month and consumers are still shopping for bargains.
One of the strongest performances came from Limited, which hosted a semi-annual sale at its Victoria's Secret stores. Limited's same-store sales rose 12 percent in June, blowing past the 3.8 percent average analyst estimate reported by Thomson Reuters.
Discounters Target, Costco and BJ's Wholesale also topped estimates.
Target said same-store sales rose 4.5 percent in June, far above the 3.2 percent analyst estimate.
According to Target, the result was at the "high end" of its own internal expectations, and was helped by an increase in the size of the transactions shoppers made.
In a recorded message, Target said it expects July same-store sales results to rise in the low- to mid-single digits. Inventories were in "very good condition" at the end of June, according to the retailer.
Despite the numbers, as I've written in other monthly roundups, it's important that we remember that the pool of retailers that still report same-store sales numbers is considerably smaller than it once was. Less than 30 retailers use the metric (down from more than 70 a few years ago). Wal-Mart stores, which singlehandedly accounts for roughly 5 percent to 6 percent of the overall retail pie, only reports quarterly figures today. And it has reported comparable store sales declines (excluding fuel sales) for eight straight quarters.
Were they still in the monthly matrix, the figures would look quite a bit different.
My look inside the monthly reports is after the jump.
Thomson Reuters reported a 6.5 percent gain, ICSC estimated that sales rose 6.9 percent and Retail Sails and Kantar Retail said the increase was 7.1 percent.
ICSC's tally shows that same-store sales rose 6.9 percent in May based on the results of 28 retailers. That's up from May's gain of 5.4 percent and below April's mark of 8.5 percent. ICSC pointed out that higher fuel prices contributed 1.4 percentage points to the overall gainsa slight increase from the 1.2 percent point lift that fuel prices had provided in the previous two months
From its monthly write-up:
June's overall industry sales growth outperformed (by 1.5 percentage points) its fiscal year‐to‐date benchmark of 5.4%. By segment, apparel sales rose by 5.5% in June versus the same month of the prior year (1.5 percentage points or pp. above its fiscal year‐to‐date average); department store sales posted a 6.2% gain in June (1.3 pp. above trend); luxury department store sales grew by 9.7% (+0.7 pp. relative to its trend); discounter sales rose by 4.6% (1.4 pp. above trend); drug store sales rose by 4.0% (0.9 above trend) and wholesale club sales rose by 7.4% (less fuel), which was 0.9 pp. above its year‐to‐date trend. Across the board, retailer business strengthened in June.
Several factors seemingly contributed to that unexpectedly strong sales performance in June. Favorable weather was among the helpful factors. Kohl's CEO explained that his company's strong sales in June followed a sluggish May performance and were driven by the most weather sensitive regions that had especially strong comparable store sales as weather turned seasonable in those regions. Also helping to lift sales may have been some increased apparel discounting after a weak May.
Although there is every reason to take these June reports as strong, the June performanceper semay be less representative of a new and stronger trend. June's outcome is more likely due to a confluence of positive factors that temporarily lifted sales above its already solid and strong year‐to‐date trend.
Looking forward to July sales (which will begin the back‐to‐school season later in this month), ICSC Research anticipates that industry sales will likely to increase by between 4.5% and 5.5%more in line with its year‐to‐date trendand by 3.5% to 4.5%, excluding the impact of fuel.
Here are ICSC's monthly same-store sales year-over-year changes, not seasonally adjusted, going back to 1993.
Click to enlarge.
Here is ICSC's index of same-store sales, seasonally adjusted, going back to 1992.
Click to enlarge.
According to Kantar Retail, sales-weighted same-store sales increased 7.1 percent in June for the 28 retailers that reported numbers (most of which were apparel retailers). (A pdf with each retailer's results can be downloaded here.) The results were up slightly from the 5.7 percent gain in May and the 3.2 percent gain of June 2010.
According to Kantar, the results were led by stronger-than-average gains at food, drug and mass retailers, some of which benefit from elevated gasoline prices. But department stores and apparel and accessory stores followed closely behind.
Frank Badillo, senior economist at Kantar Retail, said in a statement, High fuel and food prices will still take a toll, but a sustained letup in gasoline prices will help ensure that the toll means slower growth instead of outright declines in discretionary spending in the months ahead.
Here are two charts from Kantar's Shopperscape survey, which found that spending intentions moderated after falling during the three previous months.
Click to enlarge.
Click to enlarge.
High-end chains were again among the best performers in June. Neiman Marcus (+12.5% comp gain), Nordstrom (+7.9%) and Saks (+11.9%) continue to outperform as their customers are much more immune from inflationary pressures and can readily absorb significant price increases.
Warehouse Clubs also continue to perform well as they have been able to lure shoppers with cheap gas and groceries while also passing on some food inflation onto consumers. Costco (+14%, +8% ex gas & f/x) and BJ's Wholesale (+7.3%, +3.5% ex gas) have exposure to upper-income consumers and continue to steal market share from other discounters and dollar stores.
Specialty retailers began heavy promotional activity mid-month and strong demand for apparel helped drive robust gains at Limited Brands (+12%), The Buckle (+10.8%), Wet Seal (+7.3) and Zumiez (+9.8%). However, these chains may struggle to replicate these gains during back-to-school season is expected to bring 10-15% price hikes due to soaring cotton costs.
Retailers will most likely continue with heavy promotions through July, clearing inventory and preparing for the all-important back-to-school and fall seasons. Based on one early estimate, we could see the best spending growth since 2006 as personal incomes rise and households continue to de-leverage. Companies will have to be extremely careful how they go about pushing through price hikes, and expect the back-to-school period to truly separate the winners from the losers.