Despite seasonably warm weather that helped boost clearance sales of summer apparel, especially among department stores, July generally produced disappointing same-store sales growth among reporting mass market retailers.


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Retail News Breaks Archives

July sales disappoint despite warm weather

August 5th, 2010

NEW YORK – Despite seasonably warm weather that helped boost clearance sales of summer apparel, especially among department stores, July generally produced disappointing same-store sales growth among reporting mass market retailers.

Some observers interpreted the July retail sales results as evidence of ongoing frugality among consumers faced with persistent high unemployment numbers and scanty job growth. A survey by the University of Michigan showed that consumer sentiment fell to its lowest level in nine months in July, while the government today reported an unexpected spike in unemployment claims last week.

However, retail analyst Bill Dreher of Deutsche Bank pointed out in a research note that July is mostly about clearance among broadline retailers, and is not necessarily a meaningful indicator of the far more important back-to-school season that ramps up in August.

Target Corp. 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 of the discount store chain. “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, as warehouses in the United States achieved 4% growth while international units, benefiting from strong foreign exchange trends, saw results advance 14%. Analysts had expected a 5.5% increase on average.

Excluding the impact of inflation in gasoline prices and strengthening foreign currencies, however, U.S. warehouses recorded a 3% increase while international warehouses rose 8%, producing an overall adjusted 4% increase.

At BJ’s Wholesale Club Inc., July comparable-club sales expanded 2.8% overall, but merchandise sales excluding gasoline gained 1.9%, well below the 4.5% consensus estimate of analysts surveyed by Thomson Reuters.

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

Among regional discount chains, Memphis-based Fred’s Inc. recorded a 2.7% rise in comparable-store sales for the month, short of the 3.3% expected by analysts.

“Fred’s July sales reflected a solid comparable performance in general merchandise,” said chief executive officer Bruce Efird in a statement. “Our overall sales mix continued to improve as Core 5 department results and customer traffic were both strong for the month. In our pharmacy department, comparable sales were negatively affected by a shift in the retail calendar that eliminated the first-of-the-month sales benefit for July. We estimate the results of the calendar shift reduced the total comparable-store sales by approximately 75 basis points for the month.”

Other major retail pharmacy operators were disappointed in July as well. Drug store chain Walgreen Co. reported a 0.4% same-store increase, far short of the 1.6% growth expected by analysts. 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 the lack of impetus from the H1N1 flu virus that drove 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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