Citigroup published a note on their take-aways on US same store sales (SSS) in July yesterday. Here are some excerpts:
Our Take — We expect July SSS to be on-plan for the retailers under our coverage. Cool weather in the beginning of July likely hurt sales of summer clearance merchandise, but continued cool weather near month-end and early Back-to-Bullish?
School promotions may have spurred sales late in July. Tax holiday shifts and lower YOY tax refund payments likely proved to be modest headwinds in July. However, we believe retailers are optimistic for Back-to-School as comparisons ease in 3Q09 and the economic environment has shown signs of stabilization.
CIRA SSS Forecasts for July — The Citi Investment Research & Analysis (CIRA) SSS Index forecasts July SSS to decrease (-4.7)% vs. +2.5% last year and (-4.4)% in June 2009. We forecast general merchandise store SSS of (-5.9)%, department store SSS of (-10.5)%, and drugstore SSS of +3.0%.
July Weather Unfavorable — Overall, national temperatures in July were (-2.2)ºF colder than last year, and precipitation was (-4.0)% lower than last year. The first two weeks of July were the coldest in 12 years, a negative for sales of summer clearance merchandise. However, early Back-to-School sales likely received a boost from cool temperatures near month-end.
Tax Holiday Shifts a Negative for July SSS — Ten states will be shifting their 2009 tax holidays out of July and into August this year. More specifically, there will be four tax holiday days in July TY, vs. 33 days LY. The loss of 29 days YOY in July is expected to negatively impact SSS for the dept. stores the most while the clubs, discounters, and drugstores may experience a somewhat smaller negative impact.
Retailers Cycle LY's Tax Rebate Checks — Retailers continue to cycle strong sales from the tax rebate checks, as federal income tax payments to individuals in July totaled $4.5B through July 23rd, down (73.3)% from $16.7B last year.
Areas of Focus on Retail Sales Day — On Retail Sales Day, we will be listening for: 1) signs of a stabilizing consumer; 2) impact of tax holiday shifts; 3) early read on Back-to-School sales trends, and 4) inventory levels for Back-to-School.