Target, Limited Sales Beat Estimates in June Amid Discounts
June Retail Sales at Limited, Gap Beat Estimates
JB Reed/Bloomberg
Sales at Gap, the largest U.S. apparel retailer, climbed 1 percent, compared with the average projection for a decline of 2.4 percent.
Sales at Gap, the largest U.S. apparel retailer, climbed 1 percent, compared with the average projection for a decline of 2.4 percent. Photographer: JB Reed/Bloomberg
Sales at U.S. retailers, led by Target Corp. (TGT) and Limited Brands Inc., surpassed analysts’ estimates last month as discounts and lower gas prices in the U.S. enticed consumers to spend. The companies’ shares surged.
Sales at Target, the second-largest U.S. discount retailer, climbed 4.5 percent, topping the average projection for a 3.1 percent gain from analysts surveyed by Retail Metrics Inc. Limited, operator of the Victoria’s Secret chain, posted a 12 percent increase in same-store sales, surpassing the 4.4 percent average estimate.
Shoppers took advantage of discounts that retailers implemented in June to clear out inventory and make room for back-to-school merchandise. Gas prices in the U.S. have declined 10 percent since a high of $3.99 for a gallon of unleaded on May 4, according to AAA.
“Consumers are beginning to feel incrementally more comfortable and are being less cautious about their spending,” said Steve Riordan, head of PRGX Global Inc.’s advisory services unit, which consults for major retailers. “A higher level of promotion is a new reality.”
Target, based in Minneapolis, gained $3.23, or 6.7 percent, to $51.67 at 4 p.m. in New York Stock Exchange composite trading, the largest gain since Aug. 18, 2009. Limited, based in Columbus, Ohio, rose $1.05, or 2.7 percent, to $40.36.
The Standard & Poor’s 500 Retailing Index surged 12.86 points, or 2.4 percent, to 557.26, the biggest gain since Nov. 24.
22nd Straight Gain
Sales for the 25 chains tracked by Retail Metrics climbed 7.2 percent, surpassing the average estimate for a 5.6 percent increase. That marked the 22nd straight monthly gain from September 2009 as 21 chains beat analysts’ projections.
“These sales were very robust,” said Ken Perkins, president of Swampscott, Massachusetts-based Retail Metrics. “Clearly, the promotions and great deals drove customers to stores.”
Most chains count locations open at least a year to tabulate same-store sales. The revenue is a key indicator of a retailer’s growth because new and closed sites are excluded.
Victoria’s Secret, the lingerie retailer, led the gains at Limited with a sales increase of 17 percent as the chain conducted its semi-annual sale last month.
Target’s average transaction increased last month, and the retailer said same-store sales may rise by as much as a mid- single digit percentage rate in July.
Gap Rebounds
Gap Inc. (GPS), which includes online revenue, increased sales 1 percent, beating projections for a drop of 2.4 percent, after posting declines in three of the past four months. Revenue at its Banana Republic chain in North America, which discounted heavily last month, rose 3 percent.
Costco Wholesale Group, the largest U.S. warehouse-club chain, boosted sales 14 percent, topping projections for a gain of 13.1 percent. Revenue excluding fluctuations in gasoline prices and currencies rose 8 percent.
Last month included the Father’s Day holiday in the U.S., and Americans planned to spend an average of $106 on their dads, a 13 percent increase from last year, according to the National Retail Federation.
While June’s sales topped expectations after a majority of retailers missed projections in May, that doesn’t mean the back- to-school season will be strong, says David Bassuk, head of the global retail practice at AlixPartners in New York. Retailers will be trying to raise prices to offset higher input costs while selling to consumers accustomed to discounts, he said.
“Not only are July and August critical months, it also happens to be the height of when retailers are facing their biggest price pressures,” Bassuk said. “It’s going to be a painful margin time.”
To contact the reporter on this story: Matthew Townsend in New York at mtownsend9@bloomberg.net
To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net
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