HedgeyeRetail: October SSS = Shrinking Sales Sample

Takeaway: This morning’s Retail Sales are littered with one off company specific callouts and little by way of broader themes.

This morning’s Retail Sales are littered with one off company specific callouts and little by way of broader themes. For the second month in a row, a major retailer (KSS) is announcing that it will no longer participate in the monthly SSS exercise confirming its increasing irrelevance. Over the last two months, the exit of both TGT and KSS represents over 30% of last year’s SSS sample that has now withdrawn. With top-line results increasingly stressed, we expect additional defections in coming months.


All in October results came in marginally better than last month with 12 companies coming in ahead of expectations compared to 5 misses. Here are a few callouts worth noting:

  • With retailers and consumers alike still trying to measure the impact of Sandy, few details were offered.
  • The deviation of beats and misses were relatively tight with JWN and TJX the exception coming in well above expectations.
    • At JWN, the Rack continues to succeed with comps up +10.5%
  • One of the more notable callouts is the deviation between TJX (beat) and ROST (miss) given persistent strength in the off-price channel.

    • While momentum behind ROST has already started to fade, we expect today’s results to accelerate recent weakness.
    • At TJX, Europe comps up +11% confirm favorable weather helping to drive sales overseas, which is key differentiator between the two off-pricers.
  • KSS surprised to the upside after abysmal September results. In fact, when looking at the two months in aggregate, KSS’ hit its Q3 comp outlook. A notable outcome given weakness headed into quarter-end particularly given what have been very low expectations for the retailer and its inability to capitalize on share gifted from JCP. November results will be closely monitored re the sustainability of this improvement.
  • GPS results will have investors focused on the ~10% EPS 3Q beat, but a look under the hood reveals a major slowdown at Old Navy despite the most favorable setup of the year. We think GPS’s upward trajectory is increasingly unsustainable. Old Navy and Gap Domestic have benefitted significantly from JCP. Now GPS has to anniversary it.
  • TGT missed perpetuating what now marks three consecutive sequential months of decelerating underlying 2-year comp trends. With the setup getting tougher through year-end before it eases in early 2013, near-term results will remain pressured and reliant largely on cost management to drive earnings performance.
  • With underperformance at both Old Navy and ROST, we will be keeping a close eye on this development as two of the greatest beneficiaries of JCP’s share shift…dare we say an incrementally positive data point for JCP?


HedgeyeRetail: October SSS = Shrinking Sales Sample - OctSSS


HedgeyeRetail: October SSS = Shrinking Sales Sample - GPS Comps


Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more