The retail market took another step away from Aprils woes in June with modest comparable sales gains that spurred the Dow Jones into the biggest single day jump in almost four years and sent the index near the 14,000 mark. However, Friday saw stocks start to come back down as reports came out that the modest comp gains for the years second largest month in the retail calendar were actually decreases on a seasonally-adjusted basis. According to the monthly chain store audit conducted by the International Council of Shopping Centers, June retail sales rose 2.4% for the month versus the same month last year, but the ICSC also reported comp sales for the month actually decreased 1.2% on a seasonally adjusted basis. (See chart here)
The modest gains in the month that many analysts use as a bellwether for the coming Back-to-School season caused more speculation about the impact of higher gas and housing costs on of the consumer.
“The picture for the consumer hasnt changed much,” said John Morris, managing director at Wachovia Securities in an AP report. “The consumer is facing a lot of headwinds.”
“Consumers continue to be challenged financially, with more pressure on discretionary spending,” said Eduardo Castro-Wright, Wal-Mart Stores U.S. president and chief executive officer. “Gas prices have moved to be their chief concern in our latest survey and they appreciate the opportunity to save on everything.”
Wholesale clubs continued to drive the market in June as consumers opted to save money by buying in bulk. Comps in the channel improved 6.3%, nearly matching Mays 6.5% gain and above the 5.6% YTD trend. However, Luxury stores, which had been Wholesales partner in success at the top of the market, slackened its pace in June, growing just 0.3% on a comparable basis – well off the 8.0% YTD trend. Department stores as a whole were down 2.5%. The Mid-Market faired well, with Kohls and JC Penney both showing modest comp gains, but these were more than offset by softness at Macys, Dillards and Saks. Discount stores picked up the Department Stores slack, improving 2.1% over the year-ago June, largely a result of Wal-Marts 1.6% comps increase offsetting stronger results from Target, TJX and Ross.
Apparel chain stores were down 0.5% for the month, reflecting weakness at Gap and Hot Topic, though the teen market as a whole did well (+2.9%).
Zumiez Inc., which is not tracked in the ICSC report, recorded a 48.8% sales increase to $31.5 million from $21.2 million last year with yet another double-digit comps jump. Same-store store sales increased 13.7% for the month on top of a 12.4% in the year-ago period. On a recorded conference call, management said new stores and an increase in comparable store sales transactions and an increase in average unit retail combined to drive the sales gains. Mens was once again the “strongest positive contributor for the month.”
Pacific Sunwear of California, Inc. moved back into the black this June with its 4.5% total company comparable sales increase after last years 2.1% decrease. Net sales increased 9.1% for the month to $132.9 million from $121.8 million last year. The PacSun concept posted a 5.7% comp sales improvement that more than offset a 7.5% decrease at demo, when not including the 74 demo stores the company closed. The company said comps were strongest in Texas, the Midwest and the Northwest on a geographic basis.
For PacSun, girls apparel comps for the month were up mid-teens. Guys apparel comps for the month were up high-single-digits. The footwear business was said to be down mid-single-digits with guys improving in the low-single-digits, but Juniors down high-teens. Accessories were down high-single-digits for the month with girls down low-single-digits and guys down mid-teens.
Despite the improving comps, the company lowered second quarter diluted earnings per share guidance to 16 cents to 18 cents per share from the previous 18 cents to 20 cents per share. The new guidance assumes a mid-single-digit same-store sales increase versus a previously estimated low-single-digit increase and includes a penny per share impact to Q2 earnings as a result of the separation agreement with the company's former COO.
ICSC expects overall market comps to increase 2.5% to 3.0% in July.
