A few retailers tried to blame weather for less than expected sales in April 2011. The problem is that the sector had an easy weather comparison in April 2011 (i.e. negative weather impact last year).
Let’s all remember that one year ago today the sector was experiencing a similar top-line sales trend (i.e. greatly outperforming expectations) that began to come to a halt in April/May 2010.
As we look ahead to May 2011, weather in May 2010 was a top-line headwind the first two weeks of the month and a tailwind the last two weeks of the month. You can almost see what’s going to play out over the next two to three weeks of earnings season ... retailers will feel good about sales trends in early May 2011 as they’re reporting Q1 2011 earnings results.
That said, let’s not forget that a year-over-year weather headwind is looming in the back half of the month.
Food inflation continues to inch higher. Costco (COST) disclosed that its food/sundry inflation jumped to 3%-plus in April 2011 vs. last year. Food/sundry inflation was only “slightly inflationary” in March 2011.
COST disclosed that its overall fresh food inflation was in the +MSD to +HSD range in April 2011 vs. last year. All categories within fresh food were inflationary in April 2011.
In March 2011, within fresh food, beef/pork were “slightly inflationary” and poultry and produce were “slightly deflationary.”
COST disclosed that its average retail selling price for fuel was $3.82 in April 2011 vs. $2.79 last year (+37%).
And what took Gap (GPS) CEO Glenn Murphy so long? Patrick Robinson should have been shown the door long ago.
GPS suggests on its sales recording that “increases in average unit retail may not fully offset average unit cost increases, especially given the percentage of our sales in value channels. This has in fact been the case during Q1, putting significant pressure on merchandise margins, even more so than we originally anticipated.”
Yikes! It’s becoming clear that simply passing along price increases is not working, at least in the value sub-sector. The problem is that product sourcing pressure intensifies in Q2/Q3 2011.
Meanwhile, what an impressive run at Ross Stores (ROST). We believe that pack-away strategy has clearly elevated the product. Stores more closely resemble a TJ Maxx (TJX) today than it has historically (i.e. more branded product).
Target’s (TGT) monthly sales recording always says that inventory is in “very good condition.” That is, until today. This month’s sales recording only suggests that inventory is in “good condition.” This is the first time in over five to six years that we can remember a statement other than “very good condition.” We’ll re-check our history later today.
Our Compology this month is measuring relative top-line strength/weakness by comparing combined March/April 2011 comp store sales. We’ve calculated an estimate when not explicitly provided by the company.
Limited Brands (LTD): +16.7%
Zumiez (ZUMZ): +12.5%
The Buckle (BKE): +10.9%
Saks (SKS): +8.5%
Costco (COST): +7.6% (ex-fuel)
Wet Seal (WTSLA): +7.1%
Nordstrom (JWN): +6.2%
Macy's (M): +5.3%
Dillards (DDS): +4.0%
Ross Stores (ROST): +3.8%
Stage Stores (SSI): +3.3%
BJ's Wholesale (BJ): +3.1% (ex-fuel)
J.C. Penney (JCP): +2.8%
Target (TGT): +2.1%
TJ Maxx (TJX): +1.7%
Cato (CATO): +1.0%
Hot Topic (HOTT): +1.0%
Fred's (FRED): +1.2%
Kohl's (KSS): +0.6%
Stein Mart (SMRT): -0.6%
Bon-Ton (BONT): -1.2%
Gap (GPS): -1.7%
Looking Ahead by Looking Back: What Happened in May 2010?
Overall, comp store sales in May 2010 were disappointing. Almost all retailers reporting monthly comp store sales reported worse results for May 2010 than the combined March/April 2010 period.
Weather was a top-line headwind in the first two weeks of the month. That said, comp store sales in the second half of May 2010 were positively impacted by favorable weather.
In May 2010, the strongest category performance was in shoes and handbags. Weak categories included televisions and computers.
COST disclosed that the average retail price per gallon of gas in May 2010 was $2.78 (+24% versus $2.24 in May 2009).
Week No. 4 was generally considered to be the strongest fiscal week in May 2010 (favorable weather and calendar shift). Week No. 3 was generally held to be the weakest fiscal week in May 2010 (calendar shift).
The Midwest and Southeast were generally held to be the strongest comp store sales regions in May 2010. The West was generally held to be the weakest comp store sales region in May 2010.