Retailers posted a 4.3% jump in SSS for July, far better than analysts had anticipated, and some of them likely will see these healthy gains show up in their second-quarter profits.

After a lackluster June, shoppers returned to the malls in July in spite of worrying macroeconomic signals in both North America and Europe. As a result, the Thomson Reuters Same Store Sales Index recorded a 4.3% jump in July from year-earlier levels, far better than the 1.5% gain that analysts had been expecting. These results aren’t final; they exclude Walgreens (WAG.N), which will report its same-store sales tomorrow. Leaving out drugstore retailers’ results, the July 2012 SSS advance climbs to 4.8%, compared to the preliminary estimate of 3.1%. That result augurs well for the important back-to-school sales season, which kicks into high gear this month. Moreover, the results show that 77% of retailers posted same-store results that were ahead of analysts’ forecasts, another positive signal.

The apparel sector continues to lead the retail sector in terms of SSS gains, with the Gap’s gamble on colored denim paying off in a surprisingly large 10% jump in same-store sales for July. That is its largest advance in SSS since a 12% jump recorded in March 2010, more than two years ago. As expected, teen retailers Wet Seal (WTSLA.O) and Buckle Inc. (BKE.N) posted poor SSS figures, as their target adolescent customer base chose to take their disposable income to other retailers.

Forecast: Sectors With the Biggest Gains

Forecast: Sectors With the Worst Performance

The results at Gap and Wet Seal are expected to filter through to the bottom line at both companies. Analysts polled by StarMine expect Gap to report earnings that are above the current consensus estimate; it currently has a Predicted Surprise of 2.1%. Wet Seal, in contrast, has a negative Predicted Surprise of -4.1%, reflecting in part the impact on analysts’ most recent forecasts of its 15.6% decline in SSS during July. For more insight into the impact of SSS figures on earnings forecasts, please see the chart below.

Impact on Earnings Forecasts: (those likely to beat/miss estimates)

• For the full report on July’s same-store sales reports, please click here
• For more on analysts’ changing views of retail Sales, please watch this interview with analyst Jharonne Martis.

 
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