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While the smaller companies that are less representative of the overall environment are out of the box first with sales results, here's our initial read. Overall net positive thus far.

  • June sales coming in largely in line with weather-reduced expectations. Overall, it appears that underlying consumer demand is status quo here, if you incorporate last year's stimulus benefits and this year's record rain. So far, it appears that the haves and have-nots remain unchanged, as those companies such as HOTT and BEBE continue to struggle while others like TJX and GYMB continue to outperform.
  • In general, the absence of earnings revisions either way for most companies suggests to me a net positive. With nine weeks in the bag, the this would surely be an opportunity for retailers to lower EPS if they had to. Expectations were low enough heading into today, which in theory would have provided a decent backdrop to massage earnings lower. However, we are not seeing wholesale earnings revisions to the downside. Clearly, tight inventory controls, careful planning against LY, and a fairly rational promotional environment are the keys to current earnings visibility.
  • Finally, June confirms once again that the consumables driven retailers continue to drive traffic and grow share at the expense of the traditional grocers. Despite the weather, retailers including COST, FDO, BJ, etc continue to benefit from aggressive pricing, supplier discounts, and their overall value-driven strategies.

Eric Levine