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 Note that Internet-based sales are making the same-store-sales metric outdated, except for those that include online sales in their "comp."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) 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) 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) 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) and Chipotle (CMG), 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) and Aeropostale (ARO) remain too promotional for my liking.
Biggest loser of the entire week: The retailer with this dubious distinction is Wal-Mart (WMT). 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.