Goldman Sachs Anticipates Across The Board Declines In Average Price For Teen Retailers Competing For B2S Share

Goldman Sachs says, “While mall traffic and the ICSC index are weaker this month, commentary from several retailers and sequential improvement in weekly sales trends for athletic footwear (NPD) suggest that back-to-school (B2S) trends sales improved vs. July. We suspect the combination of a reason to spend and some added tax holidays in key states (FL, MA, IL) provided some lift for retailers focused on back-to-school selling.” “75% of the apparel retailers we cover grew inventory faster than sales, creating added pressure to promote. We anticipate across the board declines in average price for teen retailers competing for B2S share, and several adult retailers have already lowered their gross margin outlooks. Our indices clearance discounts are back in check in August after aggressive July clearing, but our promotions tracker shows that duration and number of special offers are still up to last year. We suspect that if sales choppiness persists, we will see even more aggressive action on both clearance and promotions at the expense of margins,” the analysts mention. Goldman Sachs adds, “Despite a beat, ANF sold off hard on concerns over high inventory. We view it as an opportunity as: (1) Better promos/product are starting to recapture lost domestic share (a trend we expect to see manifest in strong August sales) on top of double-digit sales growth from international openings; (2) This stock is inexpensive relative to a number of significant EPS growth levers; and (3) ANF is the one exception to the sector inventory rule, as a different end of season strategy has historically meant that ANF’s inventory builds do not carry the same markdown risk that others’ do.” More Analyst Ratings here