Investors are wandering around their halls, waiting for the year to finish out, waiting to see who ends up in the White House, waiting to see what happens to housing and employment -- and all the while, a banquet is being set for them. The most recent aroma to drift in comes in the form of sales figures from August. Gains were larger than expected, with three great brands serving up some of the most tempting morsels. Isn't it time to have a seat and tuck in for the feast?
The full dinner menu
This meal isn't a surprise. Retail sales figures have come in strong over the past few months, with perennial winners like Target (NYSE: TGT) posting consistent gains. In August, Target reported a 4% increase in same-store sales and a 5% revenue increase. That keeps year-to-date same-store sales at 4%, but more importantly, it points to a strong holiday season. That's what investors should be excited about, and what companies are building up for.
Last year was a mixed bag, with warmer weather keeping demand for winter clothing low, but other retailers doing well -- although even that "doing well" was mixed. While sales were up for some retailers, they ended up having to discount merchandise heavily to get customers through the doors. That hurt margins and investors. But this year is looking better, and consumer counter ShopperTrak has forecasted a 4% increase in back-to-school spending, which could give the sector momentum going into the end of the year.
The August winners
Some retailers have already started filling their plates up for the big meal, and August sales figures are giving investors a good glimpse of what's to come. Gap (NYSE: GPS) is leading the pack, with a strong 9% gain in same-store sales. The company brought $1.2 billion through the door and saw gains in every area except internationally. The North American Old Navy brand saw the biggest increase, with the company's flagship Gap brand coming in just behind. CEO Glenn Murphy continues to have success remaking the Gap brand into a fashion leader. If it can keep sales strong through the back-to-school period, then it should have no problem moving its full-priced products for Christmas.
My current favorite retailer, Buckle (NYSE: BKE), also had an unexpectedly strong August. Analysts had been forecasting a slight decline in same-store sales, but Buckle announced a 4.5% increase instead. That's not only good news for the holidays but also a good rebound from July's disappointing decrease in same-store sales. Last December, Buckle posted strong sales, which makes a good run-up to this Christmas more important, as the bar is set so high.
Finally, Limited Brands (NYSE: LTD) announced a same-store-sales increase of 8% in August. The company has been dragged down recently by its La Senza line, but in August it broke even. That figure has been helped by closing 52 of the company's Canadian La Senza stores so far this year. In its press release, Limited said it was looking forward to a small amount of growth from La Senza in September, which would be a great kick for the company moving into the holidays.
The bottom line
Sales trends are looking great moving into the end of 2012. If companies can continue this strong growth, then there's no reason they won't have a good Christmas. While Buckle is my favorite of the lot, I think Gap is probably going to have the best time of it through the rest of the year. Last year was the beginning of a turnaround for Gap, and the comparable sales that the company will post this year should be well above 2011. As I said earlier, a strong back-to-school season will put Gap in a position to rake it in this Christmas. I'd love to see September same-store sales push into the double digits.
If you like the smells coming out of the dining room, I'd pull up a seat and get ready to be full. Retailers are gearing up for an excellent Christmas, and there's no reason not to dig in with them. But these three companies aren't the only ones that are going to do well. In its special report, the Fool covers three more companies set to make millionaires out of the middle class. You can get all the details, and find out what they're cooking, for free. But this one is only up for a limited time, so get yours today.
