High-end stores including Nordstrom (NYSE: JWN) and Saks (NYSE: SKS) were especially strong in June. The impressive increases in sales results for stores open at least a year at low-cost leaders TJX Cos. (NYSE: TJX) and Ross (Nasdaq: ROST) were expected, and neither disappointed.
Retailers focused on Middle America such as industry leading Target (NYSE: TGT) performed only so-so; again, this wasn't overly surprising. What threw a wrench in the works were the results of what most industry folks see as the high-end retailers.
The specs
Before we dig into the whys, here's a recap of some of the more notable numbers. TJX and Ross both reported a 7% increase in same-store sales versus last year. Shareholders of both market leaders have reaped the benefits of strong sales these past few days, as well they should. Target's 2.1% same-store sales increase left analysts and investors underwhelmed, and the meandering of the stock price since the sales report was announced reflects the general malaise.
Here's where things get interesting, though. Nordstrom and Saks -- two of the most notable upscale retailers around -- both nailed their same-store sales results in June. Nordstrom sales jumped more than 8%, and Saks increased 6%. And these come on the heels of what was a solid May for both retailers. After four consecutive months of declines in consumer confidence, the increase in June revenues for Nordstrom and Saks are particularly intriguing. So what gives?
The whys
It was logical to assume that Americans' spring shopping would focus on low-priced alternatives given concerns about the economy. Target's emphasis on Middle America is a reasonable explanation for the tepid sales results. This economic group makes up such a large portion of the consumer spending base, and they feel the economic pinch as acutely as anyone. There is also the commonly accepted notion that an early jump on sales during relatively warm weather across the nation earlier this year left fewer consumers with disposable income. Again, this drove results for low-cost alternatives such as TJX and Ross.
All that makes sense, except for the affluent shopper. It appears consumers with the most to spend (you know who you are) aren't overly concerned with the economic realities much of America is dealing with. And that bodes well for Nordstrom, Saks, and even Macy's (NYSE: M) (owner of Bloomingdale's and woefully undervalued based on almost all measures). And lest you think June was an anomaly, all three retailers saw solid same-store sales increases in May of 5.3%, 4%, and 4.2%, respectively. Do they know something we don't? Let's hope so, for all our sakes.
With an early back-to-school season, consumers will see prices slashed earlier than usual. Though the high-end retailers will see a hit on margins when this occurs, both Nordstrom and Macy's will continue to offer strong returns for investors. Don't try to understand it; just enjoy the ride.
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