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A mixed bag for the month of May, but plenty of nuggets below the headlines worth highlighting.  Notably, business picked up across the board over the final week of the month for most retailers.




May sales are old news by now, but as with any month there’s a fair amount of company-specific detail that should not go overlooked.  In aggregate, a few themes emerged from the month.  First, business almost universally picked-up over the final week of the month, with most retailers citing a return to favorable (i.e warm) weather as a driver of apparel and seasonal sales.  Second, California was oft-mentioned as one of the weaker regions for the month.  Most retailers cited unseasonably cool and wet weather as the culprit, but is something bigger looming in one of the weakest (financial) states in the Union?  Finally, home categories stood out as the most consistently positive product areas across a wide range of distribution points.  With the Memorial Day calendar shift aiding most retailers and the early read on a better start to the month, it’s fair to expect a meaningful pick up in absolute results come next sales day. 

Additional highlights/lowlights:

  • Target noted that groceries and HBA were strong categories for month, increasing by mid to high single digits.  Apparel was also above average, driven by footwear and ladies.  Notable weakness occurred in the electronics category, which was “well below the company average”.  Comments on electronics are consistent with Costco’s recent commentary which suggested promotional activity in flat panel TV’s remains limited, which in turn is impacting demand. 
  • ROST continues to report exceptional strength in the dress and home categories, both of which increased by a mid-teens percentage for the month.  From a regional perspective, there was a wide range of performance amongst key states.  California registered a disappointing month, down 1% vs. Florida/Southeast which posted a high single to low double digit increase.  Management believes cool and wet weather during the month had a disproportionate impact on CA results. 
  • Kohl’s is awarded the e-commerce growth of the month award after registering a 50% increase in online sales.  This is consistent with Q1 trends and with management’s previous commentary on the growth potential for the .com business.  Recall, that infrastructure investment to support online growth is a key focus in 2010. 
  • While JWN did miss Street expectations, it is worth noting that the timing of the company’s Half-yearly sale did negatively impact the month’s results by 350-400 bps (amongst the highest calendar impacts of any retailer for the month).  As a result, the true measure of whether or not momentum is slowing at JWN cannot be measured until June is complete.  Jewelry, dresses, and men’s shoes were top performing categories for the month. 
  • While maybe more of a moral victory than anything else (given overall same store sales decreased by 1.8%), JCP noted that men’s apparel was the leading merchandise category for the month of May.  Management attributes this outperformance to changes the company has made in the merchandising and marketing of the category. Recall that men’s remains a key area of focus and was one of the focal points at the company’s recent analyst day.  E-commerce is also a top priority, however it continues to lag its peers, posting only a 3.1% increase for the month. 
  • Contrary to most retailers which saw a pick-up in business over the final week of the month, Abercrombie noted that sales were weaker over the second half of the month.  Management attributes the weakness to the Mem Day calendar shift and difficult compares with a summer clearance event last year. 
  • Costco noted that it is beginning to see very slight signs of inflation of the meat and produce area.  For the month, average prices for beef and pork were up, while chicken was down slightly.  Deli and frozen food also showed slight inflation.  Other standouts include softline sales, which were up in the mid-teen range for the month. Strength was driven by housewares, home furnishings, small appliances, domestics, and jewelry. 
  • Mark your calendars for the annual Aeropostale back to school line preview on July 14th.  We expect to see many positive sell side notes following the event, as this has become standard practice over the years.  How much do denim, hoodies, and graphic tees really change in one year?  
  • Keep an eye on June results for American Eagle, which will highlight the company’s efforts to clear slow selling merchandise in advance of the arrival of the company’s first back to school floorset on July 10.  Recall that AEO is betting heavily on denim and will likely need a material acceleration in same store sales to keep inventories in a favorable position relative to sales. 
  • With better than planned sales and substantially lower inventories year over year, The Limited is planning a substantial reduction in the number of days in BBW’s semiannual sale.  The event will be 10 days shorter this year, which is expected to negatively impact June comps by 7-10 points.  Overall, LTD continues to highlight substantially higher margin rates as the company has taken inventories down substantially across both brands. 
  • The Buckle noted that denim was a leading positive category for both men and women during the month.  On the flipside, footwear was one of the weaker categories.  While not a major driver of the overall business, the weakness in footwear is notable given the category’s strength across most other mall based retailers. 
  • TJX reported a notable divergence in the performance of the company’s apparel and home business.  Within the core MarMaxx division, apparel sales increased by 2% vs. an 11% increase in the home category.  Management noted that it believes home categories tend to outperform when unfavorable weather tends to impact apparel sales.  Overall, the trend in the strength of the home categories was consistent across most retailers during the month.

 - Eric Levine