July 7, 2005--With the hot June weather came better performance in the retail sector last month, beating lukewarm expectations from the National Retail Federation's Retail Executive Opinion Survey released Thursday.
Wal-Mart, J.C.Penney, Target, and Nordstrom all reported above-expected jumps in sales. However, while warmer weather encouraged shoppers to enter stores, the heat did not necessarily incline them to spend.
In particular, according to the NRF's Retail Sector Performance Index, retail executives' perception of customer traffic improved from 39.3 to 45.0, but average transaction per customer declined from 64.3 to 53.3. The overall index, which is based on executives' evaluations of various demand factors, dipped slightly from 53.6 to 52.5.
"Our survey is based on the opinion of retail executives and before the results come out," said Scott Krugman, vice-president of Industrial Public Relations for the NRF. "It reflects that executives were cautiously optimistic, and the actual results beat expectations." The RSPI is based on a 0-100 scale, with 50 equaling normal.
June saw Wal-Mart's sales from stores that had been open for at least a year rise 4.5%, ahead of analyst estimates of 3.7%, while J.C.Penney's same-store sales rose 7.4%, ahead of analyst estimates of 4.6%. The latter's results led J.C. Penney to raise quarterly earning-per-share forecasts to 35 to 40 cents, ahead of Wall Street consensus of 32 cents.
Similarly, Target's same-store sales jumped 9%, and it raised expected earnings-per-share to 58 cents, ahead of analyst estimates of 53 cents. Nordstrom reported an 8.1% increase in same-store sales, ahead of the expected 7%.
Success at larger retailers generally means smaller retailers are experiencing a boost in sales, as well. "From day to day, small retailers will track fairly closely with the ebbs and flows of the economy you see with the big guys," said Ted Hurlbut of Hurlbut & Associates, a Mass.-based retail consulting and business advisory firm. However, there is one caveat. "The one thing that differentiates smaller retailers from the larger national chains is that they generally trade in high-priced goods," he said. "A retailer that has high-priced products trading to a very affluent clientele will see softness in business when the markets suffer, and when things are more bullish, business picks up." Weather can also have an effect on smaller, localized businesses, he added.
Krugman noted that at the beginning of the month, "sales were a little up and down due to the cooler weather." However, retailers were also pleasantly surprised that "rising gas prices have not affected customer behavior as much as they thought." Finally, retailers' decisions to launch their back-to-school lines earlier in the summer were boosting sales.
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