November 5, 2015

Warm Days Cool Down October Retail Sales

by Jharonne Martis

As expected, balmy October days failed to inspire people to shop for winter coats, but the retail sales results were even a little worse than forecast. The Thomson Reuters Same Store Sales Index actual result for October 2015 showed no change, missing its final estimate of a 0.3% gain. Excluding drug stores, the SSS Index registered a -0.2% comp for October, missing its 0.1% final estimate.

It’s important to note that these results are not final, as the Gap will report October SSS on Nov. 9. However, 75% of retailers missed estimates, hit by lower gasoline prices, the effect of a strong U.S. dollar and the warmer-than-usual weather.

Once again, L Brands was the clear winner. The retailer beat expectations of a 4.4% gain with a 5.0% SSS result. Its Victoria Secret division and Bath & Body Works divisions both reported a 5.0% SSS result as their merchandise continues to resonate with customers. Costco has the biggest weighting in our index and posted a -1.0% SSS. It is being hurt by lower gasoline prices — excluding gas, Costco posted a robust 5.0% SSS. Meanwhile, Zumiez posted the weakest result at -8.1% SSS

Looking forward to Q3, our Thomson Reuters Quarterly Same Store Sales Index, which consists of 83 retailers, is expected to post 1.5% growth for Q3 (vs. 1.7% in Q3 2014).

Exhibit 1.  Performance — Overall and Compared to Expectations

Results by Sector

Costco has the biggest weighting in the Discount sector, and its -1.0% SSS brought the overall sector down. For October, the Discount sector posted a -0.9% SSS, below its -0.5% final estimate. Excluding gasoline sales, Costco’s SSS improves to a robust 5.0%, but below expectations of 5.9%. Meanwhile, Fred’s beat its 1.8% same store sales estimate with a 2.3% comp.

The Apparel sector registered a 1.3% SSS in October, missing its final estimate of 1.4%. Only L Brands beat its 4.4% SSS estimate, and registered a 5.0% comp, followed by Cato Corp. at 1.0%. Meanwhile, Stein Mart posted the weakest result in our retail universe at -2.5%.

Teen Apparel sector was October’s weakest segment within the retail universe. The sector registered a -6.7% SSS, below its -4.6% final estimate. The Buckle missed its final estimate of -3.4%, and reported a -5.8% comp. Meanwhile, Zumiez posted an -8.1% SSS, well below its -6.6% final estimate.

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