Retail: The Good, The Bad And The Ugly

By Eric Fox | July 15, 2010 AAA

Same-store sales reports for retailers in June 2010 were generally positive, but represent slower growth than earlier in the year. The data was also tainted by anecdotal commentary on aggressive promotions by some retailers.

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The Report
Same-store sales for 28 retailers tracked by Thompson Reuters indicate that June 2010 sales were up by 3.1% over last year.

The Companies
Nordstrom (NYSE:JWN) had the best same-store sales report of any retailer so far in June. The company reported same store-sales up by 14.1% during the month, far surpassing analyst's expectation of 9.1%.

Abercrombie & Fitch (NYSE:ANF) had a good month as well, with company-wide comparable stores sales up by 9%. Although any retailer would be proud of numbers like this, the report was tainted by accusations of heavy promotional discounting by the company.

If these reports were true, there would be some irony in this strategy, as during the depths of the financial crisis and recession, Abercrombie & Fitch was one of the few stores to refuse to engage in promotional discounting. The company felt that it was more important to protect its brand during that downturn.

One of the weakest reports came from Buckle (NYSE:BKE), which reported a drop of 7.3% in same store sales in June 2010. Year-to-date through 22 weeks, the company has seen same store sales drop 0.7% from the same period in 2009. Buckle operates 415 stores in 41 states, and focuses on apparel and other items for a younger male and female demographic. Gap (NYSE:GPS) reported company-wide same store sales flat in June. However, the company's flagship Gap North America store base was down 3% during the month.

Macro Reports
The MasterCard Advisors' SpendingPulse report, which is issue monthly by MasterCard (NYSE:MA), reported a slowdown in June 2010 retail sales compared to previous months. This slowdown was selective, with jewelry sales up by 10.1% over June 2009.

Retailer Tiffany & Co. (NYSE:TIF) doesn't release monthly sales data, but the company has major expansion plans for 2010. Tiffany & Co. will open 16 new stores during the year, with 50% of the new stores in Asia.

The International Council of Shopping Centers (ICSC) reported that sales for June 2010 increased by 3.0% at 31 store chains that the organization tracks. This was at the lower end of what was estimated. Same store sales from department stores were among the best sub groups, with same store sales up by 5.9% in June. JC Penney (NYSE:JCP) reflected that strength with June same store sales up by 4.5%.

The Bottom Line
Initial reports on retail same-store sales for June 2010 were pretty good, but represent a slower rate of growth compared to earlier in the year. Some retailers may also have been overly promotional during the month in an attempt to boost sales and clear out inventory. (Learn about common metrics used when comparing retail companies in Analyzing Retail Stocks.)

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