Results came in better than expected for many retailers, an encouraging sign as the back-to-school season, the second-biggest shopping season behind the holidays, kicks off. Thomson Reuters reported early Thursday that three-quarters of retailers reporting results beat expectations.
“Hot weather and summer clearance, coupled with some newness in stores in the back half of the month, is leading to a nice upside heading into back-to-school,” said Ken Perkins, president of RetailMetrics, a research firm. He said colored denim is a key fashion trend that is new in stores and attracting customers. “Retailers were pretty aggressive with promotions, trying to clear out merchandise.”
Analysts had expected modest gains in the month, as Americans slowly start to feel better about high unemployment and the bumpy global economy. On Tuesday, The Conference Board reported that its Consumer Confidence Index rose for the first time in five months. Still, that measure remains at historic lows, and is not expected to improve significantly until hiring picks up substantially. And a separate Commerce Department report Tuesday showed Americans spent no more in June than May, even though their income grew by 0.5 percent.
Only a handful of chains representing roughly 13 percent of the U.S. retail industry report monthly sales. Major chains that don’t report include Wal-Mart Stores Inc. and J.C. Penney Co. The figures are based on stores open at least a year and are a key measure of retailers’ health because they exclude newly opened and closed stores. Economists watch the numbers because consumer spending accounts for 70 percent of U.S. economic activity.
Gap Inc. was a surprise outperformer. Revenue in stores open at least a year rose 10 percent, handily beating expectations for a 3.8 percent gain. The figure rose 13 percent at Gap stores, 12 percent at Old Navy and 8 percent at Banana Republic.
Target also performed well, with revenue in stores open at least a year up 3.1 percent in July, as more shoppers visited its stores. Analysts had expected the measure to rise 2.7 percent.
And Limited Brands Inc., which runs Victoria’s Secret and Bath & Body Works, said the revenue figure rose double what analysts expected. The company also boosted its second-quarter earnings outlook and declared a special dividend on Thursday.
Teen clothing sellers were mixed. Abercrombie & Fitch late Wednesday said sales at stores open at least a year fell 10 percent. It also slashed its outlook for future earnings, including cutting second-quarter estimates to between 15 and 18 cents, about half of what analysts had expected. Wet Seal and Zumiez both missed expectations for July.
But Hot Topic Inc. and American Eagle Outfitters Inc. both reported strong second-quarter results. American Eagle Outfitters Inc. on Wednesday raised its forecast for second-quarter earnings, saying that sales during the period were stronger than expected.