Shrug Off April’s Same-Store Sales Miss

by Alyssa Oursler | May 9, 2013 1:15 pm

Shrug Off April’s Same-Store Sales Miss

I’m not the only one bemoaning the recent ugly weather; retailers could use a little sunshine, too.

Or so it seems.

Cooler-than-usual outside conditions are once again being scapegoated for worse-than-expected numbers from the retail sector. But, as I mentioned last time we chatted about weather[1], such numbers alone are little reason to worry.

One reason: Retail numbers — much like earnings — are an expectations game.

The monthly measure everyone is complaining about: a 3.7% gain in same-store sales for April[2]. Not bad considering we saw mere 0.8% year-over-year growth in April 2012, nor bad when compared to the 1.1% improvement this March — another poor showing retailers blamed on the weather.

However, while the 3.7% growth looks good in that light, it still wasn’t the 4.3% analysts had been expecting, leading to passages like this one[3] from the Wall Street Journal:

“(Retail) has now marked its fiscal first quarter weighed down by temperatures that kept shoppers away from malls, forcing steep discounts. The showing doesn’t bode well for the first-quarter results retailers will release later this month.”

I don’t buy it.

Sure, fewer shoppers and bigger discounts are hardly music to retailers’ ears. But in a twisted way, these disappointing same-store sales numbers might turn out to be good as we head into a huge block of retail earnings announcements.

Why? That ol’ expectations game.

Three straight months of weather complaints likely have tempered analysts’ and investors’ expectations for the coming earnings season. They’ve heard the drill — they know what’s coming. The bar should be awfully close to the ground by the time quarterly numbers are revealed — thus, as long as retailers can hobble over that limbo pole, Wall Street should be satisfied.

And as I wrote before, April snowstorms could bring May shoppers — those companies whose sales have been displaced by weather could see shoppers make up for it in the coming months.

Of course, all this only applies to those companies that were weighed down by weather in the first place … and we don’t actually have a great bead on that.

After all, the same-store sales calculation only includes numbers from 13 chains — a number that will slide to 11 next month. Walmart (NYSE:WMT[4]), Macy’s (NYSE:M[5]) and Target (NYSE:TGT[6]) — three huge names in the space — have already dropped out of the monthly report game, while TJX Cos. (NYSE:TJX[7]) and Ross Stores (NASDAQ:ROST[8]) are following in their footsteps next month.

I’m no statistics expert, but I know that such a small sample size is hardly in the recipe for a super-reliable metric … or a reliable reason to worry about retail as a whole.

Even within the small sample size, several retailers managed to fare just fine. ROST saw same-store sales improve by 7% and TJX improved sales 8% at stores open at least a year — both topping analyst expectations by at least a percentage point.

No wonder both discounters — which report near the end of the month — also raised their earnings outlook for Q1.

Teen retailers didn’t mind the weather, either, with the category more than doubling the expected gain, led by Buckle (NYSE:BKE[9]) and Zumiez (NASDAQ:ZUMZ[10]). BKE posted a 6.2% increase vs. the 1.5% gain expected, giving shares a nearly 2% boost this morning. At the same time, ZUMZ enjoyed a 4.6% rise vs. an expected 3.3%, propelling shares up more than 3% today.

The only real damage we’ve seen so far today has been L Brands (NYSE:LTD[11]) — the parent company of Victoria’s Secret and The Limited that formerly was known as Limited Brands — which has shed roughly 1% after reporting a mere 2% uptick in same-store sales vs. projections for a 4.6% improvement.

Costco (NASDAQ:COST[12]) also missed slightly, posting a 6% gain as opposed to the 6.3%, but investors shrugged off the margin.

You should too.

As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.

Endnotes:
  1. as I mentioned last time we chatted about weather: http://investorplace.com/2013/04/weather-wont-waylay-quality-retailers/
  2. a 3.7% gain in same-store sales for April: http://www.latimes.com/business/money/la-fi-mo-april-retail-sales-20130509,0,3562023.story
  3. like this one: http://online.wsj.com/article/SB10001424127887324744104578472703137203038.html
  4. WMT: http://studio-5.financialcontent.com/investplace/quote?Symbol=WMT
  5. M: http://studio-5.financialcontent.com/investplace/quote?Symbol=M
  6. TGT: http://studio-5.financialcontent.com/investplace/quote?Symbol=TGT
  7. TJX: http://studio-5.financialcontent.com/investplace/quote?Symbol=TJX
  8. ROST: http://studio-5.financialcontent.com/investplace/quote?Symbol=ROST
  9. BKE: http://studio-5.financialcontent.com/investplace/quote?Symbol=BKE
  10. ZUMZ: http://studio-5.financialcontent.com/investplace/quote?Symbol=ZUMZ
  11. LTD: http://studio-5.financialcontent.com/investplace/quote?Symbol=LTD
  12. COST: http://studio-5.financialcontent.com/investplace/quote?Symbol=COST

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