June Sales Results Buoy Retail Stocks
Retail stocks helped lead Wall Street’s rally Thursday in the wake of June sales reports, but some analysts wondered what investors were cheering.
Major retailers’ sales at stores open at least a year rose 2.8% in June from a year earlier, according to data tracked by Bank of Tokyo-Mitsubishi Ltd. That beat the firm’s forecast for a gain of 2% to 2.5%.
But the difference was Wal-Mart Stores, which saw sales jump 6.9%, well ahead of analysts’ 5% estimate, Bank of Tokyo economist Mike Niemira said.
Excluding Wal-Mart’s results, the industry’s sales gain was just 0.7%, suggesting that the weak economy is reining in many consumers’ spending.
That didn’t stop investors from snapping up recently battered retail shares across the board. The Standard & Poor’s composite index of 34 retail shares jumped 4.3%, compared with the 2.3% gain for the S&P; 500.
Though overall sales were anemic, discount chains and warehouse clubs such as Costco Wholesale kept consumers coming into the stores by advertising low prices and a wider selection of groceries. Costco’s same-store sales rose 5%, while Kmart’s rose 1.1% and Dollar General’s jumped 8.4%.
“The consumer still needs products, but there’s not a lot of discretionary spending happening,” said Holly Guthrie, an analyst at brokerage Janney Montgomery Scott.
Discounters aside, chains had trouble luring consumers last month. Women’s clothing company AnnTaylor Stores reported a 12% same-store sales drop and lowered its fiscal second-quarter profit estimates. Gap Inc. said sales fell 7%, and Limited Inc. had a 3% decline.
Among department stores, same-store sales fell 6.4% at Macy’s parent Federated Department Stores and 4% at Dillard’s Inc.
The June retail sales gain compares with a 1.5% increase in May. Same-store sales are a key measurement because they exclude results from stores that opened or closed within the year.
Slow sales already have led Federated, Tiffany & Co. and Linens ‘n Things Inc. to reduce second-quarter earnings estimates. AnnTaylor on Wednesday cut its forecast for the quarter ending Aug. 1 to 20 cents to 24 cents a share from 28 cents to 32 cents.
Federated, Sears, Roebuck & Co. and other chains have been trying to keep inventory levels in check so they aren’t left with excess merchandise to mark down in the second half.
Sears’ June sales fell 0.5%. But analysts expected a decline of 1% to 3%. The largest U.S. department-store retailer also said second-quarter profit from operations will be about 96 cents a share, topping the 92-cent average estimate of analysts.
J.C. Penney Co. said June department-store sales rose 3.8%, led by a strong Father’s Day holiday and demand for women’s apparel, home furnishings and men’s clothing. Analysts’ estimates ranged from an increase of 1% to 3%.
The company also reiterated its forecast for fiscal second-quarter earnings of 20 cents to 25 cents a share.
At Marshall Field’s, the department-store chain operated by Target, sales plunged 12% in June. The company’s West Coast Mervyn’s chain reported a 6.3% decline.
But sales rose 3.2% at Target’s discount stores, lifting overall company sales 0.8%.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Retail Rally
Shares of major retailers surged Thursday even though June sales reports were poor for many firms. Most of the stocks still are down sharply from their 52-week highs, though Sears hit a new high.
*--*
Ticker 52-week Thurs. close Decline Stock symbol high and change from high Sears S $43.02 $44.50, +$2.88 New high TJX TJX 35.15 32.73, +2.23 -7% Kmart KM 12.32 11.23, +0.75 -9 Target TGT 40.43 35.95, +2.57 -11 Wal-Mart WMT 62.94 51.85, +3.00 -18 Kohl’s KSS 72.24 59.45, +1.11 -18 Fed. Dept. FD 49.90 38.54, +0.13 -23 Nordstrom JWN 25.38 18.88, +0.68 -26 AnnTaylor ANN 44.88 32.78, +1.38 -27 Gap GPS 39.13 27.76, +1.86 -29 S&P; 500 index 1,530.01 1,208.14, +27.96 -21%
*--*
Sources: Reuters, Times research
