Retailers' June Sales Heat Up, Top Expectations

   By Anna Prior 
 

Retailers' sales continued to heat up in June amid improving weather and discounting as the chains looked to clear through spring merchandise and prepare for the impending back-to-school season.

While general-merchandise retailers, like Costco Wholesale Corp. (COST) and Fred's Inc. (FRED), reported strong results for June, specialty retailers, like L Brands Inc. (LTD), missed market expectations, suggesting overall consumer spending looks to be improving, but shoppers may be holding back on discretionary purchases.

Historically, sentiment among consumers isn't quite where it has been but "we're seeing positive trends that then translates into better sales," said Kurt Kendall, a retail strategist at consulting firm Kurt Salmon.

The nine retailers tracked by Thomson Reuters are expected to show 4.8% growth in same-store sales, or sales at stores open more than a year, versus 2.6% growth a year earlier. So far, eight of the companies have reported and posted 5% growth.

A number of companies, including the major department stores, have stopped reporting monthly results over the past year.

For its part, Costco reported June same-store sales grew 6%, excluding gas, topping expectations for 5.3% growth. Top-performing regions included Texas, the Southeast and the Midwest, the company said. By category, softlines recorded growth in the low double-digit percentage range, with the strongest results in the category coming from items including small appliances, housewares and apparel. The lawn and garden, health and beauty, and automotive categories also reported growth.

Fred's reported 4.5% growth in June same-store sales, surpassing the 1.1% rise that was expected. The company said results exceeded its own expectations and reflected increased customer traffic and higher transaction amounts. Results also benefited from a calendar shift earlier in the month, Chief Executive Bruce A. Efird said.

However, L Brands--formerly Limited Brands--posted flat same-store sales last month, compared with expectations for 2% growth. Still, the company said its merchandise-margin rate was higher compared with a year earlier and above its own expectations.

Of L Brands' units, Bath & Body Works reported 2% growth in same-store sales, below expectations for 3.4% growth, and reported strength in its signature collection, home fragrance and soap and sanitizer businesses. Meanwhile, Victoria's Secret recorded a 1% decline in same-store sales, missing expectations for a 1.4% increase. The company said the decrease was primarily the result of lower clearance sales as Victoria's Secret entered its semi-annual sale period with fewer clearance units. And La Senza reported flat same-store sales for the month, when 2.8% growth was expected.

Among teen retailers, Zumiez Inc. (ZUMZ) posted a 1% rise in same-store sales, below expectations for 2% growth, while Buckle Inc. (BKE) recorded a 3.4% increase in same-store sales, just shy of expectations for 3.7% growth.

Gap Inc. (GPS) is slated to reported June sales after the market closes Thursday.

Write to Anna Prior at [e-mail]

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