While the athletic footwear business suffered through a down month in July, the general state of retail for the month was surprisingly resilient. Analysts attributed most of the gains shown at retail to consumers seeking shelter from the heat and clearance events that boosted sales of remaining spring/summer inventories. Still, the market expects the consumer to pull back at some point as they continue to fight through higher gas prices and interest rates and try to find ways to balance the higher electric bills this summer driven by the oppressive heat.
Based on point-of-sale data compiled by SportScanINFO, total sports footwear sales declined in the low- to mid-single-digits for the month of July, thanks in large part to a sharp decline in the last week in the very-high-singles. SportsOneSource estimates that the monthly results translate to a low-teens comp store sales decline for the market. While the general athletic footwear business was down roughly the same as total sports footwear, Performance Footwear was essentially flat for the month. This result may also explain the reason why the sporting goods and sport specialty channels were in positive territory for the month, while the mall, family retailers, and discount/mass were all down for the month. Other categories that bucked the trend were Canvas, which saw sales increase in the low- to mid-single-digits for the month, and Fashion Athletic, which saw July sales increase in the low-teens. Sandal sales were up in the low-teens and Skate footwear posted a high-teens increase.
It was much of the same in apparel, with overall sports apparel sales showing a low- to mid-teens decline in July, while Performance Apparel posted a strong-double-digit gain for the period. Performance Apparel made up nearly 16% of total sports apparel sales in July this year, compared to just 11% of sales in the year-ago month. Non-Performance Apparel sales were down in the mid- to high-teens and Socks were down in the mid-teens, not surprising given the increase in Sandals sales. Sporting Goods was the only channel posting growth in sports apparel.
Licensed Apparel sales were down in the low-single-digits, but Headwear sales, where sales were up in the low- to mid-singles, continued to please. MLB drove the gains with Headwear sales up in the mid- to high-teens.
For the total chain store market, the International Council of Shopping Centers estimated that total comp store sales rose 3.5% for the month. The estimate is based on ICSCs survey of 60 retail chain stores. Michael P. Niemira, ICSC’s chief economist and director of research, said that intense hot weather helped retailers by encouraging consumers to snap up remaining summer goods, but it also hurt them by delaying back-to-school shopping trips. ICSC said that July was the fifth hottest July in the last 112 years, according to Weather Trends International.
While the July numbers came as a welcome surprise to many, it was no surprise that an ICSC-Citigroup consumer survey conducted in mid-July revealed that a larger share of consumers would do their back-to-school shopping later this year than last year.
Pacific Sunwear of California, Inc. had both total and comp sale decreases in the month, prompting management to slash earnings guidance for Q2. Total sales in July declined 5.0% to $102.4 million, comps decreasing 10.6% for the month.
PacSun same-store sales were down 10.2% and d.e.m.o. same-store sales were off 13.4% compared to last year. Management attributed the weak result for July to a “very slow start to back-to-school” as comps, which were down for the first two weeks of the month, declined in the low-double-digits in the third week and in the high-teens for the fourth. “The comp decline resulted entirely from lower transactions, with average transaction values up slightly to last year,” said CFO Gerry Chaney.
For PacSun, guys apparel same-store sales for the month were down mid-single-digits. Girls apparel comps for the month were down mid-teens. Sneakers continued to be a significant drag on the business for both guys and girls. Although management said that early results from the new slip-on and Nike assortments were “favorable,” the incremental business was not enough to overcome the negative trend.
For d.e.m.o, same-store sales were down high-single-digits for girls and down high-teens for guys.
The average transaction value per comp store was up slightly for the month. The average unit retail was down slightly and the average item sold per transaction was up in low-single-digits. Total transactions per comp store were down low-double-digits. Same-store sales for the 2006 first half were down 3.7% — with PacSun down 3.7% and d.e.m.o. down 3.8% for the period.
Total sales for Q2 increased 1.5% to $313.7 million and total company comps decreased 5.5% during the same period, with PacSun comps down 5.0% and d.e.m.o. comps falling 9.2%.
Given the weaker than expected sales performance in July, the company lowered its earnings guidance to a range of 14 cents to 15 cents per diluted share, nearly halving previous expectations of earnings in the 26 cents to 28 cents per share range.
The Buckle, Inc. saw a 7.6% comp decline for the month push total sales down 3.5% to $34.0 million from $35.2 million during the same month last year. Comparable sales had decreased 3.3% in July last year. Net sales for the second quarter ended July 29 decreased 1.7% to $102.4 million compared to net sales of $104.1 million for Q2 last year. Comp store net sales for Q2 declined 5.7% after an increase of 2.9% last year.
While PacSun and The Buckle continue to see sales erode with their core consumer, Zumiez becomes the alternative shopping experience that many feel is due to their commitment to remain true to their core roots. Some see the declines at PacSun attributable to the feeling that a middle-aged analyst can feel “comfortable” shopping there, while they feel noticeably out-of-place at a Zumiez.
Zumiez Inc. total net sales for the month increased 44.6% to $19.8 million from $13.7 million last year. The retailer’s comparable store sales increased 8.4% for the four-week period on top of a 12.7% jump during last years month. Comps were up 12.4%, 8.5%, 9.2%, and 4.4% for weeks one through four, respectively, of the month.
For July 2006, management attributed sales growth to help from new stores, an increase in average unit retail, and an increase in comparable store transactions. Men’s sales were the primary positive contributor for the month, although all other departments, other than juniors, had positive comps.
Shoe Carnival, Inc. posted a 1.0% decrease in comparable store sales for the second quarter, erasing some of last years 2.9% improvement, but failed to match previous guidance of a 2% to 3% gain. The company saw sales of $146.9 million for the quarter, a decrease of 1.2% from $148.7 million last year. The decline was due almost entirely to a weaker athletic business, which comped down in mid-single-digits for both mens and womens. Accessories also posted a mid-singles comp sales decline.
The non-athletic women’s business was up in low-single-digits, while men’s was up mid-single-digits and children’s, which includes children’s athletics, was “just above break-even.”
In the athletic business, SCVL said that technical running and skate shoes continued to sell well, but the increase was more than offset by weakness in basketball and classics and the shift in fashion to the low-profile look. Carnival classifies most of the low-profile-euro-casual product in their non-athletic categories.
SCVL said that margins for Q2 were higher than Q2 last year and that inventories on a per-store basis were down about 1% at the end of the quarter. Still, based on the second quarter sales results, the company lowered its earnings expectations for the second quarter to 20 cents or 21 cents per share, down from previous guidance of 23 cents to 25 cents per share.
DSW Inc. comparable store sales increased 2.2% for the second quarter on top of a 3.3% gain during the same period last year. Net sales for the thirteen weeks increased 9.1% to $301.3 million from $276.2 million during last years second quarter.
Foot Locker, Inc. lowered earnings expectations for Q2 after reporting that total sales for the period dipped 0.1% to $1.30 billion, reflecting a 1.3% decline in comp store sales that was due to continued retail challenges in Europe. U.S. comp store sales improved in low-single-digits while the International business comped down in the mid-single-digits. Excluding the effect of foreign currency fluctuations, total sales for the quarter decreased 1.2%.
Company Chairman and CEO Matt Serra said that Q2 gross margins were “negatively impacted by additional markdowns taken to maintain inventories in line with internal aging standards,” and a higher occupancy expense rate due to sales falling below plan. He noted a a “softening trend” at their U.S. stores as well as a “continuing challenging retail environment in Europe.”
FL is estimating that EPS for the second quarter will be in the range of 15 cents to 17 cents per share, compared to an initial forecast that called for earnings in the 27 cents to 30 cents range. Analysts, on average, were looking for 29 cents a share.