The retail sector was in the spotlight Thursday as a bevy of companies reported June same-store sales (SSS) today.
Costco's (COST) no-frills approach to reporting its monthly sales results paid off in spades Thursday, with the Action Alerts PLUS and Trifecta Stocks holding gaining nearly 5% after reporting a 3% year-over-year rise in June (SSS), also known as comparable-store sales, or comps.
The big-box retailer reported net sales of $11.33 billion in June, and net sales of $98.51 billion over the first two quarters of the year, a 2% increase from the $96.33 billion it made during the same period last year.
The two measures that contribute to SSS are traffic growth (equivalent to the number of customer transactions), and average basket, or ticket size (the average dollar amount each customer spends per transaction), according to AAP co-managers Jim Cramer and Jack Mohr. That fact makes Costco's strong quarter that much more impressive as the company is in the midst of a transitional phase with its credit card providers.
"We view the report favorably, especially in light of the fact that the company switched credit card providers in the U.S. just 10 days before the end of June, in what appeared to be a less-than-smooth transition," Cramer and Mohr wrote in an AAP note today. "The importance cannot be overstated of the fact that robust underlying traffic growth served to more-than-offset any card-related disruption, as traffic is the paramount barometer of customer demand."
While Costco seems to have been able to weather the storm, the rest of the retail sector isn't expected to do as well, according to the Thomson Reuters Same Store Sales Index. Analysts surveyed by Thomson Reuters expect June comps to fall 1.4%, much softer than the 0.5% growth the sector showed in 2015.
Despite that cloudy forecast, Costco wasn't the only retailer to report June comps that outperformed expectations Thursday.
L Brands (LB) reported 6% SSS growth from a year ago, well ahead of the 1.9% rise analysts at Retail Metrics estimated for the month. L Brands is the parent company of a wide range of retailers including Victoria's Secret, Bath & Body Works, Pink, La Senza and Henri Bendel. The company reported net sales of $1.30 billion vs. $1.21 billion in 2015. L Brands reported net sales of $4.73 billion for the first two quarters of 2016, a 5% increase from the $4.52 billion it earned in the first half of 2015.
The strong period was not enough to impress analysts at MKM Partners, however, as the firm maintained its Neutral rating and $60 price target on the company Thursday following the comps release.
"The stronger than expected sales at VS (Victoria's Secret) led to merchandise margins below expectations and down significantly, while they were up at BBW. We aren't surprised by the strength at VS: the lack of direct mail alone (a manufacturing, sales and distribution headwind in April and May) should have provided a boost, in addition to the impact of the longer sale in stores (roughly 10 days) and calendar shift. BBW's gain was impressive," the MKM note said. "It is unclear whether the better than expected comp and leverage of fixed costs will be more than offset by lower merchandise margins; we will look for color when we speak with management."
L Brands shares were down more than 1% Thursday afternoon.
Fellow AAP holding Walgreens Boots Alliance (WBA) released its SSS numbers Wednesday as part of its wider quarterly release. The international drugstore chain reported a surprise 4% gain in SSS during the quarter, spurred by a 3.7% increase in retail pharmacy sales.
Walgreens shares were down more than 0.6% Thursday afternoon despite the strong quarterly SSS and earnings beat. The company's price target was raised to $79 from $76 by analysts at Barclays today.
"WBA/AB synergies are running ahead of schedule with the $1 billion goal reached in June and WBA is on pace to meet the targeted goal for cost reduction of $1 billion by FY 2016 and $1.5 billion by FY 2017," the firm said.
Finally, struggling teen apparel retailers Zumiez (ZUMZ) and Buckle (BKE) rounded out the day's June comps releases. Both retailers have been in a long-term downtrend with each falling 44% and 45% over the past year, respectively.
Buckle saw SSS drop 10.6% in June compared to the previous year. Thomson Reuters was expecting the company to report a decline of just 9.8%. Overall net sales fell 10.1%, totaling $78.3 million for the month. Buckle shares were down 0.7% on weak volume Thursday afternoon.
Zumiez comps fell 4.5% year over year, topping Thomson Reuters' estimate of a 6% decline. Zumiez shares were up nearly 4% Thursday following the release.
Zumiez was able to get a short reprieve from its downward trajectory thanks to its better-than-expected June comps, while Costco's stock also took advantage of the good news. Meanwhile L Brands and Walgreens were not able reap the benefits of a strong quarter. Buckle was the least impressive of the group and suffered the most in trading on Thursday.