Seeking Alpha
Profile| Send Message|
( followers)

  • Retailers reporting monthly sales numbers generally beat expectations. We show 18 retailers beating their consensus comp store sales expectation for September 2010. We show another 3 retailers meeting their consensus comp store sales expectation for September 2010. Only 4 retailers missed their consensus comp store sales expectation for September 2010 (BJ's Wholesale Club (NYSE:BJ), Fred's (NASDAQ:FRED), Gap (NYSE:GPS), and Target (NYSE:TGT).
  • Only one company attempted to explicitly blame weather for relatively weak sales in September 2010. TJX (NYSE:TJX) complained on their monthly sales recording that warm weather throughout the month and wet weather in the final week of the month negatively impacted sales. Costco (NASDAQ:COST), JC Penney (NYSE:JCP), and Ross Stores (NASDAQ:ROST) implicitly suggested that “unseasonably warm weather” throughout the month may have negatively impacted sales.
  • Other excuses in the month included last year’s heavy demand for H1N1 vaccines (FRED) and the shift of multi-vendor mailers into fiscal October versus fiscal September LY (COST).
  • Many retailers explicitly suggested traffic trends were strong (The Gap, Old Navy, and Torrid may be the only chains reporting traffic declines).

But, many of these same retailers suggested that average unit retails (AUR) declined versus LY (e.g. Abercrombie & Fitch (NYSE:ANF), Aeropostale (NYSE:ARO), Hot Topic (NASDAQ:HOTT), JCP, Zumiez (NASDAQ:ZUMZ)). Promotional activity is still the predominant theme at the mall today.

  • End of month weakness was the theme of the day. Most retailers suggested that week #5 was their weakest fiscal week of the month.
  • The teen sector appears to be reporting the strongest results versus LY today. It’s worth noting that the teen sector was reporting the weakest results a year ago.
  • ARO has been getting a lot of flack recently for its relatively weak sales trends. And, yes, merchandise margins in September 2010 were lower than LY. But, when you take a look at ARO’s 3-year comp store sales results (i.e. comp sales results in Sept 2008 + Sept 2009 + Sept 2010), the company is a clear outperformer.

3-year comp store sales results for the teen sector in September 2010:
AEO -2.0%
ANF -19.0%
ARO +27.0%
BKE +27.8%
GPS -14.0%
HOTT -8.4%
LTD +7.0%
WTSLA -12.7%
ZUMZ +7.2%

  • GPS reported a -3% traffic decline at the core chain in September 2010 versus LY. Even worse, Old Navy reported a dismal -4% traffic decline in September 2010 versus LY. The company even suggested on its monthly sales recording that the lower traffic at Old Navy was “disappointing.” Conversely, many other retailers disclosed higher traffic counts than LY.

Gosh, even HOTT delivered +4% comp store transaction counts at its core chain versus LY and JCP reported an improved traffic trend.

It’s going to get ugly for GPS. How long will the company be able to deliver on the consensus EPS expectations via shockingly low SG&A results?

  • We’re perplexed as to why JCP continues to brag about Liz sales being above the company’s expectations. Why? On this month’s press release, the company suggests that men’s apparel, shoes, and jewelry were the strongest performing categories. This is very reminiscent of what transpired during the American Living flop.
  • ROST again raises EPS guidance due to favorable physical inventory shrink results. This must the be third or fourth year in a row of favorable physical inventory shrink results.
  • Our Compology this month is measuring relative top-line strength/weakness by comparing the 3-year comp store sales run rate in September 2010 versus August 2010.

The following retailers reported a relatively stronger 3-year comp store sales run rate in September 2010 versus August 2010 (relative strength/improving trend):
BONT
(+16.5% improvement in September 2010’s 3-year run rate vs. the August 2010 3-year run rate)
ANF (+15.0% improvement in September 2010’s 3-year run rate vs. the August 2010 3-year run rate)
ZUMZ (+10.0% improvement in September 2010’s 3-year run rate vs. the August 2010 3-year run rate)
AEO (+9.0% improvement in September 2010’s 3-year run rate vs. the August 2010 3-year run rate)

The following retailers reported a relatively weaker 3-year comp store sales run rate in September 2010 versus August 2010 (relative strength/improving trend):
SMRT (-9.5% decline in September 2010’s 3-year run rate vs. the August 2010 3-year run rate)
ROST (-6.0% decline in September 2010’s 3-year run rate vs. the August 2010 3-year run rate)
GPS (-3.0% decline in September 2010’s 3-year run rate vs. the August 2010 3-year run rate)
BJ (-0.4% decline in September 2010’s 3-year run rate vs. the August 2010 3-year run rate)

  • Looking Ahead by Looking Back… What happened in October 2009?

In October 2009, sales results were generally below expectations with the poorest performance coming from the teen space. Expectations for October 2009 had risen after chain store sales had beaten expectations in August 2009 and September 2009 (sound familiar?). Cooler weather than the prior year was generally regarded as boosting comp store sales in the first half of October 2009.

Despite the top-line weakness, retailers generally reported material merchandise margin improvements versus the prior year.

The only retailers explicitly reporting merchandise margin weakness in October 2009 were ANF and FRED.

Week #2 was generally considered to be the strongest fiscal week in October 2009. Week #4 was generally held to be the weakest fiscal week in October 2009.

The Midwest and Northern California were generally held to be the strongest comp store sales regions in October 2009. The Southeast and Northeast were generally held to be the weakest comp store sales regions in October 2009.

Disclosure: No positions

Source: Early Sales Release Thursday Thoughts