Brian Sozzi Discusses August Same Store Sales

Brian Sozzi of Wall Street Strategies is out with a research report on August same-store-sales, most of which were released earlier in the trading day. In the note, Sozzi writes, "It looks as if the primary take-away from the back to school season is that by hook or by crook, parents found the spending power to buy inflationary necessities, a splurge, and of course those weekly basics. As no surprise, good ole mom delivers once again (dear ole mom may be spending less on herself to sustain spending on the household...see the August results from moderate priced apparel chain Cato (CATO) and the sharp shift in sales trends at Ann Taylor (ANN) in 2Q11 compared to 1Q11). So in spite of how consumers are pouring out their feelings to the good folks at the Conference Board and Michigan, they have managed to grin and bear price increases, which is very important to getting comfortable around placing bets on specific stocks prior to the holidays." Sozzi goes on to say that he thinks there is potential for an "earnings bonanza" during the 2011 holiday shopping season, as well as the first half of 2012 for the best in breed retailers. This is thanks to price increases and input and shipping costs falling. He says in his note that August is the first time that consumers have been able to withstand signs of inflation, with savings being hit and credit usage increasing. He also points out that regarding teen apparel, there are a few things that scream "must have looks." He visited Abercrombie & Fitch ANF, Aeropostale ARO, American Eagle AEO, Zumiez ZUMZ, Pacific Sunwear PSUN, and Forever 21 this season, and said he saw more interesting designs and colors than last year. He points out that sneakers are hot trend, as are accessories. He notes that, "Layering is still in, and that may be helping the teen retailers (inflationary piece layered on top of inflationary piece). In fact, I would say the merchandise is so fresh that it's being perceived as a want by the fashion obsessed teen, enough of a want to get mom to dig into the Coach wallet." He concludes the note by saying, "As my comments above hinted at, there was no explosion of landmines in the set of August chain-store sales numbers. There were a few disappointments (Gap, ouch) as I expected, but the winner to loser ratio was better than I thought. Although consumer confidence weakened markedly in August, the consumer manned up and bought what needed to be bought for back to school...at a quantitative easing influenced higher price than one year ago. The slight uptick in revolving credit and drawdown in personal savings has to explain why we got the numbers we did this morning from the likes of Limited Brands (LTD), Buckle, Wet Seal, and Pier One Imports (this is interesting as the company set fall, harvest, and Halloween lines in the latter stages of the quarter....so the consumer essentially bought discretionary products to be used at a future date at close to full price). "