Consumers defied earlier indications of stronger retail spending, closing their wallets as the month of September saw political brinksmanship in Washington lead to the federal government shutdown on Oct. 1. The Thomson Reuters Same Store Sales Index saw an overall gain of 2.4%, missing the estimate of 4.5%. Excluding drug stores, the SSS growth rate struggled to a gain of 0.4%, well below the 3.1% estimate.
In addition to the uncertainty in Washington, retailers were hurt by weak mall traffic and a decline in store transactions. The ex-drug number is the weakest showing since the recession, when the index registered a -2.4% SSS result in August 2009, and compares badly with September 2012, when ex-drug SSS posted a robust 5.5% gain. Overall, however, the September 2013 SSS index compares fairly well with a year ago, when it posted a -0.5% result.
September 2013 results are based on nine retailers. Three retailers beat estimates; one met and five missed. The retailers that missed expectations have the heaviest weightings in the index.
Despite easier comparisons from a year ago, 56% of retailers missed expectations. American Apparel faced the most difficult comparison of 14%, and posted a decline of 6.0% in SSS. Still, the strongest result came from Walgreens, followed by Stein Mart, at 7.4% and 5.0% SSS, respectively. Moreover, analysts polled by StarMine suggest that Stein Mart is likely to beat its Q3 2013 EPS estimate. On the flip side, Gap registered a -3.0% SSS, weaker than its 1.6% estimate. All three of Gap’s segments missed their SSS estimates. As a result, the apparel sector posted a -2.2% SSS, also the weakest showing since August 2009.
Looking at retail sectors, discount stores posted an actual SSS gain of 3.0%, missing the 3.7% estimate. Costco was the best performer, exactly matching sector results with SSS gain of 3.0%, but missing its 3.7% estimate. Fred’s was relatively strong with a 2.8% sales gain, beating the 2.3% estimate.
Shopping for clothes was not top of mind for many consumers. Apparel retailers saw an overall result of -2.2%, well below the estimated gain of 1.7%. Excluding the Gap, one of the heaviest-weighted components in the sector, the September average for the apparel sector improved at 0.9% SSS, which is still below its 1.8% final estimate. Gap had one of the biggest misses of the group, with SSS of -3.0% falling short of the 1.6% estimate. Gap’s -3.0% decline is the worst since January 2012, when it posted a result of -4.0% SSS. L Brands posted a 1.0% SSS, below its 2.0% final estimate. Its Bath & Body Works division beat analyst estimates, while La Senza and Victoria Secret missed.
The picture was no better for teen apparel stores. This sector saw a -3.0% result compared to a 0.5% estimate. The Buckle missed its final estimate of 1.2%, and reported a -4.5% comp. Zumiez matched its estimate, posting a SSS decline of 0.6%. Both these retailers are in a very competitive and promotional environment.
If consumers weren’t at the clothing stores, they did seem to be frequenting drug stores. The sector posted a very strong gain of 7.4%, beating the 7.0% estimate. (In general, a 3.0% gain is considered an indicator of healthy consumer spending.) The strongest result in the index came from Walgreens, which received a boost from its pharmacy division.
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