Wells Fargo on Consumer Retail: July Mixed - Summer Clearance, Now B-T-S (AEO, ARO, ANF, GPS, LTD, ROST & TJX)

Wells Fargo on Consumer Retail: July Mixed - Summer Clearance, Now B-T-S

Wells analyst, said, "Specialty retailers are scheduled to report July same-store sales on Thursday, August 2. We think sales trends were mixed (FNP noted that July has been inconsistent). The first half of the month was driven by clearance; inventory levels were lean overall which could mean softer sales, but better margins. The second half of the month saw initial back-to-school (BTS) floor sets which we think drove some conversion in fashion items (printed and colored denim). Going into August, we think lower gas prices and a new fashion trend could drive strong BTS."

"We are modeling comps up 5% for American Eagle (NYSE: AEO) and 3% for Aeropostale (NYSE: ARO) for Q2 (including ecommerce), in line with consensus, but we see upside to high-single digits and mid-single digits, respectively, and a few pennies of upside to Q2 EPS consensus estimates...We are modeling Abercrombie & Fitch (NYSE: ANF) Q2 comps down 4% (excluding DTC); consensus is down 5%...For Gap (NYSE: GPS), our July comp estimate is up 4%, in line with consensus...For Limited (NYSE: LTD), our July comp estimate is up 7%, slightly above consensus of 6.3%...For the off pricers, our comp estimate is up 4% for both Ross Stores (Nasdaq: ROST) and TJX Cos (NYSE: TJX). Consensus estimates are up 4.0% for ROST and 4.6% for TJX...We think both ROST and TJX could raise Q2 2012 EPS guidance by a few pennies. Our Q2 EPS estimate for ROST is $0.78, Q2 EPS estimate for TJX is $0.53."

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