Slow Shopping: July Retail Sales Miss Estimates

| About: Consumer Discretionary (XLY)

By Jharonne Martis

The latest retail sales figures for July bear out earlier dismal forecasts, with the Thomson Reuters Same Store Sales Index registering a preliminary -1.5% comp for July, missing its -0.9% final estimate. These results are not final as Gap (NYSE:GPS) will report on Aug. 8, but the indication is that mid-summer is proving to be very difficult for the retail sector. In addition, there were more downward surprises in July than usual and only one retailer posted a positive result.

There was some good news: L Brands (NYSE:LB) came in on top with a 2.0% SSS results, above its 0.4% final estimate. The retailer received a boost from its Bath and Body Works' division, which posted a very healthy 6.0% SSS gain, while its Victoria Secret's group posted a flat comp.

However, Costco (NASDAQ:COST) posted a weaker-than-expected -2.0% SSS. Excluding the negative impact from gasoline price deflation and foreign exchange currencies, this result increases to 1.0% SSS. Teen retailer The Buckle (NYSE:BKE) registered the weakest result in our retail universe at -10.9%, followed by Cato Corp.'s (NYSE:CATO) -10.0% SSS result. Gap is expected to post a -0.3% SSS when it reports next week.

July marks the last month of Q2 2016. The Thomson Reuters Quarterly Same Store Sales Index, which consists of 80 retailers, is expected to post 1.0% 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