Giving retailers an A for effort in August would be way too kind. Back-to-school shopping should be a boon for retailers, but not this year. Despite some better-than-expected August same-store sales data, the sector and its cash registers remain eerily quiet.
Not adding up to much
Overall, same-store sales fell 2.9% in August, the 12th consecutive monthly decline. That figure did beat analysts' expectations for a 3.8% decline, but it's no cause for celebration.
Let's take a look at some specific retailers' sales data for August.
|
Company Name |
CAPS Rating |
August Comps |
August Net Sales |
|---|---|---|---|
|
Costco (NASDAQ:COST) |
**** |
(2%) |
Flat |
|
Gap (NYSE:GPS) |
* |
(3%) |
(2%) |
|
Abercrombie & Fitch (NYSE:ANF) |
** |
(29%) |
(23%) |
|
Target (NYSE:TGT) |
*** |
(2.9%) |
0.1% |
|
Aeropostale (NYSE:ARO) |
** |
9% |
16% |
|
Buckle (NYSE:BKE) |
*** |
3.6% |
9% |
*All data from CAPS and company press releases.
Costco, Target, and Gap were all lauded in the media for topping analysts' forecasts, but their numbers are still nothing special.
In particular, Gap's turnaround is getting extremely long in the tooth, after years of malaise. A 7% increase in its stock intraday looks absurd to me, especially given that only one of its concepts could deliver positive same-store sales. (Old Navy increased comps by 4%, in case you were curious.) Despite that pleasant surprise, Gap hasn't given buyers any less reason to beware.
Abercrombie & Fitch delivered the kind of abysmal numbers that shareholders increasingly expect these days. I guess kids (and their wallet-wielding parents) don't feel like adding a $90 hoodie to their back-to-school ensembles. Worse yet, Abercrombie's still paying its CEO a huge chunk of change for this ongoing lack of performance. Thank goodness for reliable old Aeropostale and Buckle, which continue to buck the retail trends.
The back-to-school blahs
Clearly, back-to-school shopping didn't give August comps much of a boost. Many consumers simply can't spend money like they used to, in the face of layoffs, lost houses, and slashed credit card limits. Sears Holdings' (NASDAQ:SHLD) Kmart recently announced that some shoppers have been driven to put simple, inexpensive school supplies like pens, notebooks, and markers on layaway.
Retail is a difficult sector right now, and investors who aren't careful may see their portfolios get razed before it's all over. In this minefield of a market, companies like Aeropostale, with strong brands, sturdy balance sheets, and trend-bucking performance, are definitely the way to go.
Shop around for some related Foolishness:
- Could 10,000 stores close?
- When will retail finally turn?
- Search for retail outliers.
