Shoppers may have flocked to the malls, but did they open their wallets? S&P gives its forecasts for key industry players
From Standard & Poor's Equity ResearchHow did the summer start for major retailers? June sales, which will be reported on July 12, will encompass the five-week period ended July 7, 2007, which included the Fourth of July holiday. Overall, we saw a lot of shoppers hitting the malls during June, but not a whole lot of shopping bags going out the doors.
Last week, cooler temperatures and rain on the East Coast probably didn't help demand for summer clearance merchandise and likely prompted many retailers to take steeper markdowns. That said, we think unseasonably cool weather benefited a few retailers such as Aéropostale (ARO) and Gap's (GPS) Banana Republic that had early fall assortments already in stores.
Out West, we think a lot of consumers flocked to the malls last week to escape the heat and humidity. But we're not sure increased mall traffic translated into higher retail sales.
Based on store traffic and promotional activity that we observed in recent weeks, we are reiterating most of our preliminary June same-store sales projections. We only lowered our estimates for two companies: Chico's (CHS), from flat to –2%, and J.C. Penney (JCP), from –3% to –3.5%.
S&P's forecasts for key industry players in four segments—Specialty Apparel Retailers: Youth, Specialty Apparel Retailers, Department Stores, and Hypermarkets, Mass Merchants & Drugstores—are shown in the accompanying tables (data from Standard & Poor's Equity Research and company reports).