The combination of falling gas prices, heavy promotional activity, event-driven spending and unseasonably hot and dry weather helped retailers post robust sales gains in June. However, there continues to be a divergence between those chains that cater to well-heeled shoppers and those that target the low-income consumer, and the gap will only widen as retailers look to pass on higher input costs to consumers in the back half of the year.
Total net sales for the 27 retailers we track increased 9.0% from a year ago to $38.3 billion in June, while same-store sales rose 7.1% on top of a 3.2% gain last year – this was the 22nd straight monthly gain after 12 consecutive months of declines, and the second strongest increase in the last 15 months.
For the five-month fiscal year-to-date period, total sales have increased 7.4% to $170.4 billion and comparable store sales are up 5.6%, on top of a 4.3% rise in the prior-year period.
High-end chains were again among the best performers in June. Neiman Marcus (+12.5% comp gain), Nordstrom (+7.9%) and Saks (+11.9%) continue to outperform as their customers are much more immune from inflationary pressures and can readily absorb significant price increases.
Warehouse Clubs also continue to perform well as they have been able to lure shoppers with cheap gas and groceries while also passing on some food inflation onto consumers. Costco (+14%, +8% ex gas & f/x) and BJ's Wholesale (+7.3%, +3.5% ex gas) have exposure to upper-income consumers and continue to steal market share from other discounters and dollar stores.
Specialty retailers began heavy promotional activity mid-month and strong demand for apparel helped drive robust gains at Limited Brands (+12%), The Buckle (+10.8%), Wet Seal (+7.3) and Zumiez (+9.8%). However, these chains may struggle to replicate these gains during back-to-school season is expected to bring 10-15% price hikes due to soaring cotton costs.
| June 2011 Retail Store Sales Scorecard | Same-Store Sales Chg |
| Company/Segment | Sales (1,000's) | YoY Chg | Jun-11 | Jun-10 | YTD-11 | YTD-10 |
| Bon-Ton | $ 240,800 | -1.5% | -0.9% | 1.4% | -1.3% | 1.9% |
| Cato | $ 90,400 | 2.5% | 1.0% | 1.0% | 1.0% | 5.0% |
| Destination Maternity | $ 42,900 | 4.6% | -1.4% | -4.4% | -1.9% | -5.3% |
| Duckwall-ALCO | $ 49,400 | 12.0% | 10.6% | -6.6% | 4.9% | -4.9% |
| Gap | $ 1,380,000 | 5.3% | 1.0% | 1.0% | -2.0% | 3.0% |
| Gap North Am |
|
| -1.0% | -2.0% | -3.0% | 1.0% |
| Banana Republic NA |
|
| 3.0% | 7.0% | -1.0% | 5.0% |
| Old Navy NA |
|
| 2.0% | 1.0% | -1.0% | 4.0% |
| International |
|
| 3.0% | 0.0% | -4.0% | 2.0% |
| JC Penney | $ 1,545,000 | -0.3% | 2.0% | 4.5% | 2.5% | 1.6% |
| Limited Brands | $ 1,080,000 | 11.9% | 12.0% | 6.0% | 12.0% | 8.0% |
| Bath & Body Works |
|
| 5.0% | -8.0% | 8.0% | 2.0% |
| Victoria's Secret |
|
| 17.0% | 17.0% | 17.0% | 13.0% |
| VS Direct |
|
| -2.0% | 17.0% | 2.0% | 11.0% |
| La Senza |
|
| 1.0% | 1.0% | -2.0% | 2.0% |
| Neiman Marcus | $ 375,000 | 12.6% | 12.5% | 1.9% | 10.8% | 7.3% |
| Specialty Retail |
|
| 11.1% | 0.6% | 10.2% | 6.9% |
| NM Direct |
|
| 18.3% | 7.7% | 13.8% | 9.0% |
| Rite Aid | $ 1,928,000 | 1.0% | 1.8% | -2.5% | 0.9% | -1.8% |
| Front End |
|
| 1.5% | -1.1% | 0.5% | -1.6% |
| Pharmacy |
|
| 1.9% | -3.1% | 1.1% | -1.8% |
| Saks | $ 258,600 | 8.7% | 11.9% | 2.5% | 12.3% | 5.3% |
| Stein Mart | $ 104,500 | -2.5% | -1.5% | 0.6% | 0.7% | -3.1% |
| TJX | $ 2,130,000 | 8.1% | 5.0% | 3.0% | 3.0% | 7.0% |
| Wet Seal | $ 57,900 | 15.1% | 7.3% | -3.6% | 6.4% | -0.3% |
| Wet Seal | $ 49,000 | 17.4% | 7.5% | -3.7% | 7.2% | -0.6% |
| Arden B | $ 8,900 | 5.0% | 6.6% | -3.2% | 2.0% | 1.4% |
| 4.3% |
Though most chains beat analyst estimates, there was some notable weakness in retailers that cater to low and middle-income consumers. Stein Mart (-1.5%), Bon-Ton (-0.9%) and Fred's all posted disappointing sales as their core customers continue to deal with strained household budgets.
Bruce A. Efird, Chief Executive Officer of Fred's, said, "June sales reflected the volatility experienced with our customers' purchase patterns and demonstrated the broader decline in consumer sentiment that has been reported for the month. After a solid start in the first half of June, we saw a significant downward adjustment in the last half of the month as customer traffic remained positive, but our average customer ticket declined. Another example of the challenging economy was seen in the paycheck cycle, which was very pronounced in the final weeks of the month,"
While gas prices rose half a cent last week to $3.579, they had fallen for 7 consecutive weeks and are still down nearly 10% from the peak reached during the week of May 9th, no doubt helping to somewhat ease the burden on household budgets. However, prices at the pump are still 31.3% higher than this time last year.
And as this morning's Bloomberg Consumer Comfort Index reading shows, factors such as the weak job and housing markets and stagnant incomes are offsetting any good feeling from falling fuel costs.
"The risk to the recovery is that, should sentiment remain depressed, whatever relief to consumer balance sheets is provided by falling gasoline prices will not translate into a pickup in household consumption," said Joe Brusuelas, a senior economist at Bloomberg LP in New York.
Retailers will most likely continue with heavy promotions through July, clearing inventory and preparing for the all-important back-to-school and fall seasons. Based on one early estimate, we could see the best spending growth since 2006 as personal incomes rise and households continue to de-leverage. Companies will have to be extremely careful how they go about pushing through price hikes, and expect the back-to-school period to truly separate the winners from the losers.