Barclays on U.S. Department Stores/Broadlines: Review of June Sales

Barclays on U.S. Department Stores/Broadlines: Review of June Sales

The Barclays Capital Broadlines/Dept. Store Same Store Sales index increased 8.5% in June, well ahead of our expectations and a sequential uptick from May. This compares to our recently raised 6.9% estimate and a 4.1% increase last year.

Analyst, Robert S. Drbul, said, "Warm weather clearly aided demand of seasonal merchandise this month, and several retailers noted an increase in transaction size during the month, while mall traffic was down (2)%. The two year Barclays Capital Broadlines Same Store Sales Index increased 12.6%, demonstrating overall momentum and broad-based strength."

"Retailers catering to the high end continued to perform well in June, led by an 11.9% comp increase at Saks (NYSE: SKS) (vs. our 4%-6% estimate). Nordstrom (NYSE: JWN) has been very consistent over the last several months, delivering a 7.9% comp increase (vs. our 5%-7% estimate). Macy's (NYSE: M) (with exposure to the high end via its Bloomingdale's format which performed well this month) also surpassed our expectations again with a 6.7% comp increase. Macy's showed strength in contemporary fashion, private label, and center core among other areas. Costco (Nasdaq: COST), which also serves a higher income customer, generated a 14% comp increase (+ 8% in the U.S. excluding gas)."

"Retailers catering to middle income customers showed some signs of life this month, as demonstrated by Kohl's (NYSE: KSS), Macy's and Target (NYSE: TGT). After disappointing results in April and May, Kohl's experienced an impressive result, well ahead of expectations at 7.5%, benefitting from some planned promotions that proved to be quite effective. Target also exceeded sales expectations, led by another double digit comp in grocery, with mid-single digit sales growth in apparel and a low-single digit sales decrease in home. Importantly, Target has experienced a sequential increase quarter-to-date from the first quarter, which had a comp increase of 2.0%. However, J.C. Penney (NYSE: JCP) reported a 2.0% comp, underperforming its peer group and plan. In accordance with a sluggish start to the second quarter for J.C. Penney, we are lowering our 2Q11 EPS estimate to $0.08 from $0.20 and lowering our 2011 EPS estimate to $2.10 from $2.25."

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