As expected by CVI analysts, same-store sales for June were not all that impressive. Companies such as Gap continued their downward spiral while others like American Eagle are enjoying the good life by posting positive figures approaching the double digits. Today, July 12, 2007, retail stores announced their same-store sales for the month of June. This report will examine those results are and see how effective CVI was at predicting them.

Gap continues on its decreasing trend by posting total same-store sales of negative five per cent after a similar drop of three per cent in May. This is very disappointing. The company even underperformed analyst’s expectations who projected a decrease of only 4.6 per cent. While the company as a whole saw a decrease in same-store sales, not all divisions did poorly. Banana Republic North America increased by seven percent, however Gap North America and Old Navy both experienced decreases of nine and seven per cent, respectively. CVI analysts predicted that with extensive markdowns on the majority of their collection in stores, Gap would see a slight increase in their same-store sales over May’s figure of negative three per cent. We did however predict correctly that would not experience an increase.

Abercrombie & Fitch reported same-store sales of two per cent, which was above expectations of analysts who projected a decrease of 2.8 per cent. CVI analysts on the other hand felt that with increased traffic of its four banners, Abercrombie & Fitch would show a slight improvement over last months negative five per cent. Hopefully this two per cent increase from last year means that Abercrombie & Fitch is in the process of recovering.

American Eagle had a lot to brag about when it announced its same-store sales rose eight per cent this past month from a year ago. Analysts estimated a moderate increase in same store sales of 4.4 per cent . At CVI however, we were quite certain that the company would do well; June marks the end of school for their target market, resulting in these students pouring into the stores. We projected same-store sales of between five and seven per cent and were right on the mark.

Wal-Mart today announced that their same-store sales rose 2.4 per cent from last year. This does not take into consideration gas prices—when counted in, take this number up to 2.5 per cent. This comes as a shock to analysts who projected same store sales of 0.8 per cent. The company attributes this increase to strong sales of their electronics, mainly in their flat panel televisions and Dell computers, which they recently started to carry last month. CVI analysts also underestimated same-store sales, projecting an increase of flat to minimal sales. Our justification for this projection was that oil and gas prices would continue to impact the middle-class shopper, which in turn would impact retailers such as Wal-Mart.

Target happily announced a same store sales increase of 3.3 per cent. This was very close to analyst’s estimate of three to five per cent . Since CVI analysts were skeptical about fluctuating oil gas prices, like we were for Wal-Mart, we wrongfully projected flat to minimal gains.

Overall CVI analysts were fairly effective at projecting same-store sales for June 2007. Keeping in mind unstable weather, fluctuations in gas prices and oil consumption, we were right to assume that same-store sales would be slightly affected. In a survey regarding spending habits, 40 per cent of 1,000 shoppers said that they reduced their spending in June due to higher gas prices. We were however wrong about Wal-Mart having a bad month but then again so was Wall Street. We were also correct to assume that sales going on in all stores would cause same-store sales for the month to be lower since discounted prices cut into their margins. It appears from this report that certain companies such as ANF might me on the mend while others such as Gap could be on their way out.


The Canadian Value Investor © 2007