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I'm not sure if it's because WMT is no longer reporting monthly same store sales are there are fewer companies reporting across the board, but May results feel like a very small part of the bigger picture at this moment (because they actually are!).  Yes, the majority of companies missed estimates but at the same time the actual results were also generally in line with company guidance. Expectations were a little higher as the trend last month got baked in and the trajectory of recovery appeared to be gaining momentum.  At the very least, May results remind us that volatility can and still exists with consumer on a weekly and monthly basis. 

Check out the two charts below showing sales trends in mall-based vs. specialty apparel and in department stores. The 1 and 2-year comps have been all over the place, but the 3-year (which mitigates issues like weather, stimulus checks, tax rebate timing, etc...) has hardly budged at (-3%) to (-5%).

A Whole Lot of Nothing - Apparel Mall Specialty May Chart

A Whole Lot of Nothing - Department Stores May 2009 

Perhaps the term "stabilization" was used a few too many times over 1Q earnings season.  The trend does remain stable but shorter term upticks and downticks will continue.  The facts is, May is the smallest month of the quarter, inventories remain clean across the sector, and everyone knows comparisons are getting increasingly difficult as we lap stimulus checks. 

In looking at the standouts, of which there are few, there is nothing overly surprising.  Those companies with momentum still have it.  TJX, ROST (the only company to cite weather as a positive), ARO, and KSS are the outliers to the upside.  Not so surprising again in that all of these companies are price-driven, value retailers.

In trying to discern product or regional trends, anecdotes were mixed across the board.  Consumable categories appeared to outperform while home related goods were mixed.  On the apparel side, dresses are still the hot category and footwear remains a positive call out.  The Southwest region was most often cited as being an outperformer while the Southwest was the weakest.  Overall, it sounds like the pricing environment remains unchanged (i.e. no uptick in promotional activity or heavy discounting) and traffic was a just a bit weaker than anticipated.

So the question is, what has changed now that May sales have been released?  Nothing.

Eric Levine

Director