Sept. 5 (Bloomberg) -- L Brands Inc., which owns Victoria’s Secret and has powered through a choppy economy, reported August same-store sales that narrowly missed estimates, the latest evidence of weakness among U.S. apparel chains.
Sales at L Brands stores open at least 12 months rose 2 percent, compared with a predicted gain of 2.1 percent. Teen chain The Buckle Inc. posted an increase of 1 percent, just surpassing analysts’ estimates for a gain of 0.6 percent.
The results come after retailers from Macy’s Inc. to Wal-Mart Stores Inc. missed second-quarter sales estimates and cut forecasts. Retailers also had a sluggish start to the back-to-school shopping season in July. The chains reporting August sales today have done little to buck that trend, which may continue into the holiday shopping season, the largest spending period of the year.
“There has been a shift away from spending on apparel and other discretionary items and a shift toward purchases of homes and automobiles,” Jennifer Davis, an analyst with Lazard Capital Markets in New York, said in a phone interview today. “The consumer is feeling better and is willing to make larger item purchases but that leaves them with less money in their wallet to spend on other things. The items you can live without, people are living without.”
Many Americans are eager to replace cars after postponing such purchases for years. The U.S. auto sector posted August sales results that exceeded already rosy estimates, with a total surpassing any month in more than six years and the fastest sales rate since 2007. Consumers’ spending on home-related products also lifted sales for both Home Depot Inc. and Lowe’s Cos.
L Brands declined 2.1 percent to $56.90 at the close in New York. The Buckle fell 1.2 percent to $51.70.
August same-store sales for the more than 10 companies tracked by Swampscott, Massachusetts-based Retail Metrics rose 3.8 percent. While that surpassed analysts’ projections for a gain of 3.2 percent, the results were bolstered by a strong showing by Costco Wholesale Corp. and Walgreen Co.
Gap Inc., the largest U.S. specialty apparel retailer, posted a gain in same-store sales of 2 percent after U.S. markets closed. Analysts projected an increase of 1.9 percent.
“Back-to-school so far is anemic at best,” Adrienne Tennant, an analyst at Janney Montgomery Scott LLC said in a conference call with clients before the results. “That usually has had a high correlation with holiday” sales.
A year ago, shoppers ignored economic headwinds and helped push retailers to a same-store sales gain of 5.9 percent. Back then 20 companies reported. Since then half have dropped out, saying they would rather focus on quarterly rather than monthly results, which can be volatile.
Most chains tally same-store sales using locations open at least a year, making the figure a closely watched gauge of a retailer’s health because it tracks only established stores.
This year, U.S. households are planning to shell out an average of 7.8 percent less for back-to-school shopping because of the bumpy economic recovery, the National Retail Federation estimated. Store traffic has fallen in nine of the past 11 weeks, though the declines moderated in the week ended Aug. 31, according to ShopperTrak, a Chicago-based research firm.
Francesca’s Holdings Corp., the operator of women’s boutiques, reduced its full-year profit forecast yesterday after same-store sales in the second quarter fell 1 percent because of lower levels of store visits that will continue.
Teen chains such as Abercrombie & Fitch Co. and Aeropostale Inc. also painted a bleak picture last month after earnings and sales in the second quarter trailed analysts’ estimates. Aeropostale also said it would be closing more stores than it previously indicated and Abercrombie’s third-quarter forecast for earnings per share was less than half of what analysts projected. Neither retailer reports monthly sales.
“We’ve definitely seen more weakness in the teen space,” Davis said. “Part of it is due to Mom has less money that she is willing to spend on teens. Part of that is also due to lack of a meaningful fashion trend.”
Sales may pick up this month as teens who waited for school to start to see what their friends are wearing return to the malls, Tennant said in a note to clients on Aug. 29. To entice shoppers, retailers are offering discounts of as much as 50 percent.
“Promotions were aggressive across the mall, particularly over Labor Day weekend, raising concerns about margin pressure for retailers’ third-quarter earnings,” said Ken Perkins, president of Retail Metrics in an e-mailed statement. “We may see stepped up discounting as these retailers are forced to compete even harder for a limited pool of consumer discretionary dollars.”
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