Discounts helped boost August Same Store Sales, with Costco and Victoria's Secret parent L Brands leading the pack, coming in much better than forecasts. Bobbi Rebell reports.
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Discounts and deals dominated during the month of August, helping retailers sell more, but at a cost to profit margins, and that may be the new normal.
Thomson Reuters Director of Consumer Research Jharonne Martis:
SOUNDBITE: JHARONNE MARTIS, DIRECTOR OF CONSUMER RESEARCH, THOMSON REUTERS (ENGLISH) SAYING:
"There is an improvement but it's very, very slow and it's mainly driven by promotions and discounts. So there's a lot of concern on Wall Street on whether the margins will be hurt. However we saw two very strong performers today Costco smashed expectations and so did L Brands. That was boosted by Victoria's Secret Pink line which is mostly targeted to young ladies just in time for back to school season."
In the loser column: Gap. Same-store sales there fell 2 percent. A gain had been expected.
Overall, excluding drug stores, the Thomson Reuters I/B/E/S Same Store index registered a growth rate of five percent, beating its 3.9 percent final estimates.
Moody's Analytics Jon Lonski:
SOUNDBITE (English): JOHN LONSKI, CHIEF FINANCIAL MARKETS ECONOMIST, MOODY'S ANALYTICS, SAYING:
"What we are seeing there is very sluggish growth for general merchandise stores, for department stores and the like. If we are getting any strength in retail sales it's been in the areas of auto dealership sales as well as building material store sales something related to the improvement in home sales. We are simply not seeing the types of growth rates that we observed during past recoveries as far as retail chain sales are concerned."
That in turn, putting pressure on apparel retailers to battle for what's left of consumers budgets.
Morty Singer is the CEO of retail consulting firm Marvin Traub Associates.
SOUNDBITE: MORTIMER SINGER, PRESIDENT AND CEO, MARVIN TRAUB ASSOCIATES (ENGLISH) SAYING:
"I think in particular for back to school and the children's area of the business is hugely competitive right now. Inventories tend to be, I think in general, in line right now. People have planned pretty well for it but nonetheless the comps are being eroded, therefore margin is going to really come into question here based on that competition for those dollars. It's really about share of market right now."
Retailers will likely remain under pressure over the holidays- which Singer expects will be dominated by jewelry and accessories.
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