Costco Wholesale Corp. and L Brands Inc. reported stronger-than-expected sales in August, though the month was dominated by deals and discounts as retailers tried to boost back-to-school sales.
The warehouse club chain and intimate-apparel and personal-care retailer have hefty weightings in the Thomson Reuters sales index, and both have been standouts of late among retailers.
“Competition for back-to-school dollars has been fierce,” said Ken Perkins of Retail Metrics, referring to the aggressive promotions used by retailers to lure consumers during the critical shopping period, which is second only to the holiday shopping season.
Johnson Redbook Research noted earlier this week that students are increasingly shopping for fall clothes after school starts, pulling some back-to-school sales into September.
Still, concerns about the consumer have been building as typically strong companies like Michael Kors Holdings Ltd. and Kate Spade & Co. pointed last month to a need to ramp up discounts to clear merchandise. And Macy’s Inc., seen as a leader among department stores, lowered its sales forecast for the year, succumbing to similar pressures.
The preliminary reading of the Thomson Reuters sales index indicated retail sales rose 5.6% in August, excluding newly opened and closed stores. Factoring in Gap Inc. and Zumiez Inc., which are expected to report after market close, Thomson Reuters had projected the eight retailers it tracks to post 3.9% growth versus a 3.3% increase a year earlier.
Many retailers, including the major department stores and most big-box retailers, stopped reporting monthly metrics some time ago, making it difficult to gauge the health of the entire industry.
L Brands, formerly L Brands, for its part noted that the merchandise margin rate for August was about flat compared with last year. The company said sales rose 5% last month, topping consensus estimates for a 2.7% increase.
The growth was led by a 5% increase in sales for the company’s Victoria’s Secret brand, which topped expectations for 3% growth. The company noted strength in the brand’s young adult focused Pink line, which had a back-to-school focus during the month.
Meanwhile, the Bath & Body Works brand recorded a 4% sales increase, driven by strength in the brand’s signature collection, home fragrance and soap and sanitizer businesses. Analysts had expected growth of 3.5% for the month.
Costco reported a 7% increase in August sales, excluding gasoline, far surpassing analysts’ estimates for 5.2% growth.
Top-performing categories at Costco included housewares, small appliances, apparel, fresh foods and food sundries like cooler and deli products.
Among teen retailers, Buckle Inc. said sales edged up 0.8%, missing analysts’ projections for 1.2% growth.
Gap, another major component of the index, is expected to report a 1.6% increase, while teen retailer Zumiez, which sells action sports-related apparel, footwear and equipment, is expected to report 2.5% growth.
-Erin McCarthy contributed to this article.
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