August Retailer Results: Housing Weakness Threatens High End's Momentum

by: Robert Zenilman

Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

Mixed Retail Results Breed Unease

  • Summary: Overall, same-store sales (for stores open at least one year) for retailers in August rose 2.8%, below the 3.7% the industry was logging during the first half of this year. Continuing the trend, higher end stores are seeing stronger increases than the low/middle end. However, aside from blaming gasoline prices for lower-than-expected store traffic, the weakening housing market is starting to have a psychological effect on higher income consumers. Discounters: Wal-Mart (NYSE:WMT) same-store sales rose 2.7%, hitting the high end of its 1%-3% forecast – overall customer traffic declined. Target (NYSE:TGT) saw same-store sales rise by 2.8% - customer traffic was flat. JC Penney (NYSE:JCP) blamed “softer sales of big-ticket items, particularly furniture," for its flat same-store sales in August. Bucking the trend, Kohl's (NYSE:KSS) same-store sales jumped 5.2%. Department Stores: Neiman Marcus and Nordstrom (NYSE:JWN) saw 4.4% and 7.1%, respectively. While Federated's (FD) 3.8% increase was at the high end of their forecast, sales figures from the 400 stores added via the May acquisition were not included. Teen Apparel: Abercrombie & Fitch (NYSE:ANF), American Eagle Outfitters (AEOS) and Bebe Stores (NASDAQ:BEBE) saw same-store sales rise 6%, 11% and 13%, respectively. The Gap (NYSE:GPS) continues to struggle, posting a 2% increase at Banana Republic, but seeing same-store sales decrease 8% at Old Navy and fall a whopping 11% at its Gap division.
  • Comment on related stocks/ETFs: While analysts initially thought that the impact of high gasoline prices would be focused on low-end retailers, as gasoline prices stabilize (or even decline), concern may shift to higher-end retailers, primarily due to concerns about the housing market (Check out SeekingAlpha's Housing Bubble and House Prices Tracker).