Retailers generally posted lackluster same-store sales increases in July, as continued worries about the economy caused many consumers to put the brakes on discretionary spending.


Scot Meyer, same-store sales, July, Gregg Steinhafel, chairman, president, chief executive officer, Kantar Retail, senior economist, Frank Badillo, Costco Wholesale Corp., Fredís Inc., chief executive officer, Bruce Efird, Rite Aid Corp., Walgreen Co.






























































































































































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Inside This Issue - News

Retail sales remain disappointing in July

August 23rd, 2010

NEW YORK – Retailers generally posted lackluster same-store sales increases in July, as continued worries about the economy caused many consumers to put the brakes on discretionary spending.

Kantar Retail reported a same-store sales gain of 2.9% for July, based on a sales-weighted composite for 31 retailers that reported sales for the month.

The figure, which does not include results at Walmart, is down slightly from the 3.2% same-store sales gain the same retailers posted in June. But it is still dramatically better than the 4.6% decline posted in July 2009.

"Retail sales growth appears to be leveling off at a modest pace as it moderates from a spring surge fed by economic stimulus and pent-up demand," comments Kantar senior economist Frank Badillo. "But the results are uneven among retailers, which reflects tough price competition in certain channels and diverging spending intentions among upper- and lower-income shoppers."

Kantar’s research suggests that spending intentions have stabilized among upper-income households while weakening among lower- and middle-income households.

Department stores did comparatively well in July, with clearance sales of summer apparel helping to boost volume. Mass retailers, including food, drug and discount store operators, were weaker overall.

Target Corp., for example, reported a 2% increase in comparable-store sales for the month, which was in line with management’s expectations but fell short of the 2.3% consensus forecast among analysts polled by Thomson Reuters.

"Store traffic and apparel sales were strong, and we continued to experience soft sales in electronics, video games, music and movies," said Gregg Steinhafel, chairman, president and chief executive officer. "Retail segment expenses remain well controlled, and profitability in our credit card segment continues to be strong."

Costco Wholesale Corp., meanwhile, posted a 6% gain in chain-wide comparable-warehouse sales. Analysts had expected a 5.5% increase. Clubs in the United States achieved 4% growth while international units, benefiting from strong foreign exchange trends, saw results advance 14%. on average. But when the impact of inflation in gasoline prices and stronger foreign currencies are excluded, Costco’s U.S. warehouses recorded a 3% increase and those overseas yielded an 8% gain, for an overall adjusted 4% increase.

BJ’s Wholesale Club Inc. posted an overall 2.8% comparable-club sales gain in July, but when gasoline sales are excluded the increase was just 1.9%, well below the 4.5% consensus estimate of analysts surveyed by Thomson Reuters.

Comp-club sales excluding gas actually rose in the first three weeks of the month but decreased slightly in the fourth, management says. Store traffic excluding fuel increased about 4%, but the average transaction decreased by about 2%. Similarly, while food sales improved 4%, general merchandise fell 2%.

Regional discounter Fred’s Inc. recorded a 2.7% rise in comparable-store sales for the month, short of the 3.3% expected by analysts. Chief executive officer Bruce Efird notes that comparable-store sales in the retailer’s pharmacy departments were hurt by a shift in the retail calendar that eliminated the first-of-the-month sales benefit for July.

The calendar shift hit other major retail pharmacy operators as well. Walgreen Co. reported a 0.4% same-store increase in July, and management said calendar shifts reduced results by 1 percentage point. Walgreens’ pharmacy comp-store sales were flat, while front-end results increased 1.1%, as traffic edged up 0.6% and average transaction size expanded 0.5%. Executives blamed generic drug introductions and tough comparisons due to the boost the H1N1 flu virus gave last July’s results.

At Rite Aid Corp. management cited the same factors in explaining an overall 1.1% decrease in comparable-store sales that was driven by a 1.4% dip at the pharmacy. Front-end comp-store results edged down 0.5%.

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