Editor's Note: This article was originally published at 12:00 p.m. on Real Money on July 11. Sign up for a free trial of Real Money.
June same-store sales data, released Thursday, was a heaping pile of ugliness in the context of an improving labor market -- and retailers continue to be promote around the clock, both in-store and online. Note that Internet-based sales are making the same-store-sales metric outdated, except for those that include online sales in their "comp."
In any case, of the eight retailers still reporting these increasingly relevant numbers, only Zumiez (ZUMZ - Get Report) managed to hike guidance. Come to think of it, the Zumiez numbers were rather strong -- considering the hyper-competitive specialty-apparel market, I have no idea how it managed to log increases in average transaction value and average unit retail prices.
On the other hand, Gap (GPS - Get Report) came out with a steaming pile of dung after the bell Thursday. Its June sales fell short of consensus and, in my view, this is the precursor for an earnings print -- due next month -- that should be in-line to slightly disappointing. Gap may be banking too much on a purported July 4 spending spree, which it perhaps believes will offset probable weak traffic in the rest of the month. (A strong July 4 weekend was hinted at, believe it or not, by Family Dollar (FDO - Get Report) CEO Howard Levine Thursday.)
The overall lack of second-quarter guidance boosts was disturbing considering the economic data we have been receiving -- and given that retailers are two months through the second quarter. Yes, we had the good weather in June, and now in July. Also, yes, there was the pre-July 4 buying and the insight into July 4 weekend -- though executives didn't even mention sales trends on the latter. However, nothing truly positive stood out in these numbers, and yesterday's negative stock reactions said it all.
Here, then, are a few things to keep in mind.
Retail is shrinking because it has to: We are currently experiencing the next wave of store closures, and I expect big-time restructuring announcements in February 2015, even if the holiday season turns out stronger than expected. The U.S. remains over-stored, and it must position itself for more mobile commerce. Sorry, mall owners.
Winners in this crazy environment: The standouts are Starbucks (SBUX - Get Report) and Chipotle (CMG - Get Report), which continue to benefit from apparel-retailer efforts to drive traffic. Further, these companies are not discounting! They may run promotions, but their promotions are profitable -- which is the opposite of what's occurring at many clothing and electronics retailers. Belus Capital Advisors rates Starbucks a Hold, and Chipotle a Buy.
Losers: The duds are found in the entire specialty-apparel sector aside from the aforementioned Zumiez, which raised guidance. American Eagle (AEO - Get Report) and Aeropostale (ARO - Get Report) remain too promotional for my liking.
Biggest loser of the entire week: The retailer with this dubious distinction is Wal-Mart (WMT - Get Report). To me, management comments from earlier in the week suggest that the company's quarter is running below plan. Oddly, Wal-Mart shares have outperformed the Dow and S&P 500 this week in spite of the negative commentary. I think the market is delusional, and that I am right in my long running stance: I am still no fan of this company. Belus Capital Advisors rates Wal-Mart a Sell.