Back-to-School Season Weak

This morning, several retailers reported August same-store sales. This is an important report because it provides investors with an idea of how strong or weak the back-to-school shopping season was.

Quick Take: Overall, the back-to-school season was weak. Below is a sample of 22 retailers that reported same-store sales and only 8 of those companies reported a positive number. And despite ankle-high expectations, half of those companies reporting same-store sales missed those low expectations.

The trade down trend is still working with positive comps from Wal-Mart (WMT - Snapshot Report), Costco (COST - Snapshot Report), BJ's Wholesale Club (BJ - Analyst Report), and TJX Companies (TJX - Snapshot Report). Department stores in the mid-to-high end continue to struggle. Specialty retailers were all over the map, with Abercrombie & Fitch (ANF - Analyst Report) down 11% while Buckle (BKL) was up 22% and Aeropostale (ARO - Snapshot Report) was up 13%.

Closing thought: Retail stocks have caught a bid over the last several weeks, as the market appears to be expecting better results in the future quarters. Maybe these investors believe lower gas prices or an improved economic environment will drive the growth.

I just don't see it. Gas prices, while down from all-time highs in July, are still up
about $0.90/gallon over last year. The global economy appears to be weakening further, and that probably pushes out a recovery for the US consumer.

What's more, a weak back-to-school season usually leads to a weak Christmas season, which is the most important period of the year for retailers. That said, it is hard to be too negative on the retail group. The stores remain focused on inventory controls and cost-cutting efforts, and the market's expectations are still pretty low.

Wal-Mart [WMT] +3.5%, Target [TGT] -2.1%, Costco [COST] +9.0%, JC Penney [JCP] -4.9%, Kohl's [KSS] -5.8%, BJ's Wholesale [BJ] +15.4%, TJX Companies [TJX] +2.1%, Zumiez [ZUMZ] +0.2%, Gap [GPS] -8.0%, Cache [CACH] -6.0%, Saks [SKS] -5.9%, Nordstrom [JWN] -7.9%, Limited Brands [LTD] -7.0%, Wet Seal [WTSLA] -8.7%, Fred's [FRED] +2.1%, Dillard's [DDS] -7.0%, Abercrombie [ANF] -11.0%, Chico's [CHS] -10.0%, Buckle [BKL] +22.0% and Aeropostale [ARO] +13.0%.