Summer Retail Sales Are Off To A Healthier Start

| About: Consumer Discretionary (XLY)

By Jharonne Martis

Bright summer skies seem to be indicating happier times in the retail sales environment. The Thomson Reuters Same Store Sales (SSS) Index registered a 0.8% gain for June, beating its -1.4% final estimate. There were more upward surprises than usual: 57% of retailers beat expectations.

L Brands (NYSE:LB), Gap (NYSE:GPS) and Costco (NASDAQ:COST) came out on top with 6.0%, 2.0% and flat SSS results, respectively. After 14 straight months of negative SSS, Old Navy helped Gap post its first positive SSS. The division usually performs well during the summer, and in the back-to-school months.

After two consecutive months of negative SSS at Victoria's Secret, L Brands posted a robust 6.0% comp. The retailer received a boost from its Victoria's Secret's semi-annual sale. However, the retailer warned that July SSS will be flat or down in the low single digits as Victoria's Secret continues to transition away from some of its merchandise, including swimwear. Meanwhile, The Buckle (NYSE:BKE) registered the weakest result in our retail universe at -10.6%, followed by Cato Corp.'s (NYSE:CATO) -8.0% SSS result.

June marks the second month of the retail industry's Q2 2016. The Thomson Reuters Quarterly Same Store Sales Index, which consists of 80 retailers, is expected to post 0.9% growth for Q2 (vs. 1.4% in Q2 2015).

Exhibit 1. Performance - Overall and Compared to Expectations

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Source: Thomson Reuters I/B/E/S estimates

Exhibit 2. Beat - Met - Missed

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Source: Thomson Reuters I/B/E/S estimates