Retailers Post Strong Sales, Discounters Lead The Way
Retailers, including Wal-Mart Stores, are posting solid same-store sales growth in June, as expected, as seasonal weather and tax rebate checks helped get consumers to the store.
Wal-Mart said Thursday its sales at U.S. stores open at least a year rose 5.8 percent in June. Buoyed up by these results, Wal-Mart increased its second quarter earnings forecast.
Analysts, on average, were expecting the company's same-store sales to rise 3.8 percent, according to Thomson Reuters Estimates, while the company had forecast U.S. same-store sales would rise 2 percent to 4 percent.
Wal-Mart said it now expects earnings per share of 82 to 84 cents due to "improved sales results during the quarter."
When Wal-Mart reported first-quarter results in May, it forecast second-quarter earnings per share of 78 to 81 cents. At the time, the forecast was below Wall Street estimates and Chief Financial Officer Tom Schoewe said the company was being "appropriately conservative" given the volatile environment.
Discounters Lead the Way
In general, analysts are expecting discounters to perform better as consumers look to stretch their dollars further amid a weak economy and high gasoline prices.
"The stimulus package has definitely helped. The value message is definitely being felt," said Dana Telsey, CEO and chief research officer at Telsey Advisory Group, in an interview on CNBC.
"The strength at Wal-Mart, better gains at Target lately...it's just continuing, and we've also seen that at the off-pricers like TJX, and even look at some of the children's wear retailers with value pricing, like what we're seeing at Children's Place and also at Aeropostale," Telsey said.
Indeed, wholesale retailers like Costco Wholesale felt the gains of the stimulus check. Costco reported better-than-expected same-store sales gain of 9 percent in June and an increase of 12 percent to $7.14 billion from the same period last year.
Internationally, Costco's comparable sales for the period rose by 11 percent, boosted by the positive impact of the weak dollar especially in Canada, the company said in a statement on Thursday.
BJ's Wholesale Club also experienced a spur in sales reporting a 16.5 percent increase which included gas sales, and a 8.3 percent increase excluding gas.
The discount chain Family Dollar Stores was not far behind BJ's with an 8 percent increase and a forecast of a July increase of 3 to 5 percent.
Family Dollar Stores broke Thomson Reuter's estimates of a 5.6 percent gain and had a 10.7 percent increase in total sales to $715 million.
Also, Target, which has not profited as much as Wal-Mart in recent months, had a slight increase in sales of .04 percent despite a predicted decline by Thomson Reuters of .05 percent.
Checks May Help Back-To-School Season
Telsey said with the last of the stimulus checks being mailed July 11, she expected to see the impact of the checks continue into the back-to-school season.
Gilbert Harrison, CEO of Financo, said in an interview on CNBC he also expects the strength of the checks to continue to be felt during the next few months.
"I think come July and August, when you have back-to-school, you’re going to get a new surge," he said.
Retailers are trying to keep consumers in the store by putting their goods on sale automatically, but this puts them at risk, Harrison said
"When the goods are on sale, the margins are going to be hurt, hurt tremendously," he said.
U.S. comparable chain store sales rose 4.3 percent in June from a year earlier, according to the International Council of Shopping Centers.
The biggest surprise, so far, has come from the Buckle , which reported a 28.9 percent gain in same-store sales compared with a 21.0 percent average analyst estimate.