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The retail sales results for May and the recent jobs report (or lack of enough jobs report) were, at best, mixed. It is clear, and has been for several months, that the recovery is going to be a slow, difficult, up and down ride. This is not going to be a year of a rising tide lifting all boats. There are going to be some winners and losers.
The category that continues to be strong is the value/discount sector. BJ’s, Costco, TJX and Ross in particular. Those retailers held firm throughout 2009 and have remained solid this year. Target, Victoria’s Secret and Aeropostale also appear firm. Those latter 3 each have their own formula that is working.
The outdoor segment continues to do well. RetailSails hears that The North Face is showing double-digit gains with their classic, best-selling, Denali jacket (which they had thought of stopping production on for fear of it being too old school) having it’s best year ever. Also, Patagonia has put together a very robust 6 months.
Saks, Nordstrom’s and Neiman Marcus, who all reported double-digit drops last year and therefore have easier numbers to hit, all reported very good comps for May after a strong March and April. Conversely, teen retailers like A&F, American Eagle and Hot Topic are struggling and will be going through a clearance phase for the next month or two.
Additionally, Forever 21 and Zara appear to have an inventory buildup as well that they are going to have to liquidate at reduced prices. This will press the traditional department stores, which have been barely hanging on, to feel the price and margin pressure.
How long will this go on for? The consumer picture is not going to change dramatically for at least 6 months. So there will continue to be winners and losers. Michael Niemira, chief economist at the International Council of Shopping Centers, forecast a 3 percent increase for June, partially because of the Memorial Day weekend switch from may to June. Arnold Aronson, managing director of Kurt Salmon Associates predicted a low single digit gain.
