Accessories Are King in Retail
Retail surprises on the upside. Futures jumped a couple points pre-open as July retail sales up 0.8 percent was far better than expected, ex-auto and gasoline were better than expected, as well. June data was revised slightly lower.
Several retailers reported, and there is one standout: Michael Kors is on fire.
Look at these numbers for KORS: Revenue up 71 percent year-over-year, same-store sales up 37 percent, and it is guiding third-quarter same-store sales up 30 percent. The retailer is in that key accessories area that is hot, and its apparel designs have been well received. Of course, being a guest judge of “Project Runway” isn't bad either.
Here's a key point: Michael Kors is doing great in Europe...yes, Europe! Retail same-store sales were up 24 percent in Europe — and this is still a small company — it only did a little more than $100 million in sales there.
It seems that Michael Kors is taking some share away from Coach and other luxury retailers, because others in this space are seeing some deceleration.
Look at Coach same-store sales: third-quarter 2011 was 9.2 percent; fourth quarter 8.8 percent; first quarter 2012 6.7 percent; and 1.7 percent for the second quarter. Expectation for the third quarter is 2.5 percent.
Look at Tiffany: same-store sales for third quarter 2011 was 16.7 percent; 5 percent in the fourth quarter; 4 percent in the first quarter 2012; and now an expected decline of 1.1 percent in the second quarter. That is deceleration.
Even Saks, which lost a lot less than expected in its earnings report out this morning, has seen very modest same-store growth rates coming down: 4 percent in May; 6 percent in June; and 3.5 percent in July. Nordstrom has been in the upper mid-single digits.
Bottom line: While the high-end consumer may be taking something of a breather, the success of Michael Kors indicates the power of accessories, which can be worn more often and across different seasons.
1) Corporate America rushes to sell bonds. Last night JPMorgan Chase sold $2.5 billion of five-year debt at a 2 percent coupon. That's 135 basis points off of the comparable five-year Treasury. True, this is one of the best capitalized banks in the world, but still.
International Business Machines priced a $1 billion, 10-year bond at 1.875 percent at the end of July, even tighter than JPMorgan.
2) It's a veritable pop culture lovefest at the New York Stock Exchange today: Teen heartthrob Robert Pattinson (of “Twilight” fame) is ringing the opening bell, and the five U.S. Olympic women gymnasts, including Gabby Douglas, are ringing the closing bell.
—By CNBC’s Bob Pisani
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