A dreadful year-ago period that saw same-store sales drop 5.1% on poor market conditions had initially set up July 2010 for inflated results, but a hodgepodge of unfavorable circumstances led the consolidated retail results to a paltry 2.8% growth for the month. The market heftily missed estimates due to hotter-than-usual weather, job concerns and picky consumers that are buying “wear now” product because of limited discretionary income.


According to the International Council of Shopping Centers-which tracks 31 retail chains, excluding Walmart -most analysts had predicted a 3-4% improvement for the month.


For retailers, disappointing results were an ominous sign for the back-to-school period, and many industry watchers are predicting that retailers will once again have to resort to margin-crushing heavy discounting to move apparel and product out the door. The ICSC also pointed out that July is historically a “far less significant month” for the retail calendar because sales are mainly driven by summer merchandise clearance.


Despite languid returns from the July reporting period, results from the aforementioned sizzling temperatures don’t necessarily point to another “gloom-and-doom” BTS period. In fact, as the ICSC points out, there is a chance of a significant rebound since the weather postponed BTS shopping into early August. “Overall,” wrote the ICSC, “a July sales performance was modest and did not provide any clear verdict on the back-to-school season as a whole.”


Among the hardest hit by the consumers’ penchant for deep discounting was the Teen segment, where comps edged up just 1.4% despite year-ago numbers that suffered a great deal from similar market conditions. Additionally, Teen retailers have also been impacted from high teen unemployment rates, which have swelled to 26% recently, according to several reports. Retailers missing estimates in the Teen sector were Hot Topic     (-9.0%), Wet Seal (-4.3%), Aeropostale (+1.0%) and The Buckle (-9.3%). 


Abercrombie & Fitch (+7.0%) was a pleasant surprise for the month, as the recently-maligned retailer reversed its misfortunes by cutting prices to lure in more customers.


Likewise, American Eagle (flat) narrowly exceeded forecasts by launching discounts on jeans for the BTS season. At Gap, which has been a steady performer, considering market conditions, comps inched up 1.0% on strength from its Banana Republic and Old Navy brands.


Results for Department stores were lukewarm, with continued strength from the Luxury segment offset by middling results from larger mid-market stores. The Luxury sub-segment performed very well versus the year-ago period, with every retailer reporting growth against deep declines July 2009. Top performers for the month included Neiman Marcus (12.3%), Nordstrom (+7.6%) and Saks (+6.4%), which topped expectations on strength from women's shoes and sportswear, handbags, dresses, men's apparel, footwear and accessories. 


At the other end, larger department stores struggled,   as JC Penney (-0.6%) reported surprisingly poor numbers and management subsequently warned that second quarter profit would likely be at the low end of previous forecasts. In contrast, steady performer Kohl’s (+7.1%) and Macy’s, which was up 7.3% in July, emerged as the only bright spots
Among Discounters, results were somewhat of a mixed bag.


Ross Stores (+2.0%) narrowly missed internal forecasts, and CEO Michael Balmuth suggested that increased promotions at other retailers may have cut into sales for the month. At high-end discounter Target (+2.0%), increased foot traffic offset average tickets, but the company narrowly missed on analyst expectations. At TJX Cos., comps improved 2.0% on increased customer traffic and 3.0% comp strength from The Marmaxx Group, which includes the company’s Marshalls and T.J. Maxx chains. 


Management for TJX updated guidance for the second quarter, with earnings per share expected to be “at or slightly above” the high end of previously issued guidance.


For Warehouse Clubs, Costco (+4.0%) exceeded estimates but BJ’s Wholesale (+2.8%) fell short. Representatives for Costco said fuel sales and international revenue boosted monthly sales. Sales of cigarettes, drinks, housewares, produce, tires and water led BJ’s to growth for the month even though it missed forecasts.


In related news, retailers can continue to expect lackluster sales as long as the job market plods along and, according to the most recent report by the Labor Department, that looks to be the case. The Labor Dept. reported Friday that for the third straight month, companies showed a lack of confidence about hiring as the unemployment rate remained unchanged at 9.5%. According to the report, private employers added a net total of only 71,000 jobs during July, which experts say is far below the 200,000 needed each month to reduce the unemployment rate. Overall, the Labor Dept. confirmed the economy lost a net total of 131,000 jobs last month, mostly because 143,000 temporary census jobs ended.


Zumiez Posts Solid July Comp Sales Gain…


Zumiez reported comparable store sales increased 9.4% for the four-week period ended July 31 versus a 16.8% comp sales decline in the year-ago month, driven by an increase in comparable store transactions.


ZUMZ said that dollars per transactions were down due to a decrease in average unit retail and a decrease in units per transaction. Total net sales for the month increased 15.0% to $34.4 million from $29.9 million in fiscal July 2009.


ZUMZ’s highest comping region was the South, which was up 10%, while stores in the West, Midwest and Northeast comped up approximately 7%, with remaining increases coming from e-commerce sales.


Accessories, men's, footwear, and boys posted positive comps and were partially offset by negative comps in hard goods and juniors.


The company said it now expects diluted loss per share in the second quarter of 2010 to be a negative 2 cents to negative 3 cents which includes estimated charges of approximately $1 million or 2 cents per share associated with the relocation of its distribution center from Everett, WA, to Corona, CA.


The Buckle Disappoints in July…


The Buckle reported that July comparable store sales decreased 9.3% in comparison to the prior-year July period.  Total net sales decreased 3.9% to $59.1 million compared to net sales of $61.5 million in the prior-year fiscal July.


On the men's side of the business, which represented approximately 40% of total sales for the month, sales were down about 2.5% but overall price points were up approximately 1% for the period. Positive categories on the men's side included denim and woven shirts. Women's total sales for July were down approximately 6% from the prior-year period and represented about 60% of total sales for the month. Positive categories on the women's side included active apparel and accessories. For the fiscal month, overall price points on the women's side of the business were up approximately 2.5%.


Accessory sales for the fiscal month increased approximately 9.0% in comparison to the prior-year fiscal July, while footwear sales decreased approximately 3%. The two categories accounted for approximately 9.0% and 5.0%, respectively, of the current fiscal July’s net sales. 


Average accessory price points were up approximately 7.5% and average footwear price points were up approximately 4% for the fiscal month.