National retailers were pleasantly surprised by an uptick in sales last month, as industry insiders and analysts said consumers appear to be loosening the grip on their wallets. The perfect timing and buzz surrounding the mailing of child tax credit rebate checks helped the numbers late in the month as well, adding momentum heading into the Back-to-School season.
According to the monthly Bank of Tokyo-Mitsubishi survey of 77 retailers, chain stores reported an average increase of 4.3% in July same-store sales, easily beating the 1.7% increase that retailers averaged for the first six months of this year and a nice gain over the 2.6% increase from a year ago. The gain was the largest since June of 2002 when average comps rose 5.1%
“It was a good month and it may be a good omen for the second half,” said Michael P. Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd. “Sure, the month was promotional and weather helped, but this could be the start of a much better trend.”
The increase helped push the SportsNewSource Retail Stock Index up 3.5% for the week, with the Department Store index up 3.9%. But the Specialty sector suffered from a few poor performers for the week that saw the index slip 0.2% for the week. See cover chart.
The excitement that was felt in most other sectors did not translate to key retailers in the sporting goods and athletic footwear segment that report on a quarterly basis. The weaker start to the period offset the potential late quarter gains from BTS and tax rebate checks.
The completion on Monday of the Gart/TSA merger moved investors to take profits from their gains since the deal was announced, pushing the new TSA shares down 8.3% for the week.
Footstars quarterly announcement that it would not report Q2 numbers as scheduled and required sent FTS shares down 7.5% for the week. Hibbett was off 6.3%. The segment was balanced by strong gains at GSI (+8.1%) and Dicks (+4.9%).
Foot Locker was off 1.1% for the week, to close at $14.52 on Friday, with rumors of a warming of the Nike relationship tempered by a weak comp-store sales report for Q2. Nike gained 4.2% for the week.
Foot Locker, Inc. reported that second quarter sales for the period through July were up 3.4% to $1.12 billion. Comparable store sales decreased 4.4%, with U.S. Foot Locker sales down in the “high singles” and Champs off in the “low singles”. The retailer continues to see nice growth in its International division, where Q2 comps improved in the mid-single digits.
Analysts expected a 1.4% comp store sales decline.
Fulcrum Global Partners LLC analyst George Lusch said in a report that the U.S. comp decline was driven by weaker average shoe prices and store traffic.
“We remain concerned that the absence of certain Nike offerings will continue to have a detrimental impact on FL's traffic in the U.S.” wrote Lusch, who has a “neutral” investment rating on the company's stock.
The weaker dollar provided some currency exchange gains and total sales for the period would have actually been down 0.9% for the quarter in local currencies.
FL re-affirmed its previous guidance of 24 cents to 25 cents a share for Q2, in line with analysts estimates. Higher margin product from other brands appears to be offsetting the impact of the Nike issue.
Galyan's Trading Company reported that Q2 net sales increased 15.0% to $163.7 million compared to the same period last year, but comp store sales declined 7.7%. The retailer posted higher comps in outerwear, hunting and bicycles, but saw comp sales softness in the camping, water sports, fishing, casual apparel, and swimwear categories.
Gander Mountain said sales rose sharply in the second quarter, reporting that that overall sales increased about 33% in the quarter, with same-store sales up about 16% for the period. CEO Mark Baker said the outdoor retail chain is on track to hit close to $500 million in sales for the year.
Shoe Carnival got a nice boost for the week, with shares jumping 5.8% for the week to close at $14.67 on Friday after the family footwear retailer reported sales for the July period increased 12.6% to $47.2 million while comparable store sales inched up 0.3%.
The company said it was tracking down in the “low singles” until the last ten days of the month, when the trend moved positive with the with the start of the back-to-school season.
The Womens business comped down in “high singles while Mens comps moved up in the “low singles”. The Kids business was flat. Athletic footwear was up in the “mid singles” and total footwear was up 1.0%. Athletic was driven by retro and white classic product and off-price opportunities.
Famous Footwear results were less favorable, where sales dipped 1.4% for July to $85.1 million. Same-store sales decreased 3.2% for the month, but the retailer hopes to see some uptick from a new promotional shoe from Nike. The $59.99 “Throwdown” shoe hit stores in June.
Pacific Sunwear again led the charge to the positive, reporting that total sales for July increased 24.0% versus last July. Total same-store sales increased 15.1% for the month with PacSun comps up 14.4% and d.e.m.o. same-store sales up 22.0%.
The retailer raised its second quarter earnings guidance to the range of 25 cents to 26 cents versus its previous guidance of 23 cents per share.
