MarketWatch First Take
July's mixed blessing for retailers8/2/12 11:36 AM ET (MarketWatch)
NEW YORK (MarketWatch) -- For retailers, July can be a blessing and a curse.
It's a month that's heavy on clearance, so while it's always great to sell stuff, it would have been better to sell it a couple of months ago -- at full price.
But in a period marked by gloomy economic news and bleak reports of consumer inertia, the fact that people were "stimulating the economy," even if it was in search of bargains, is better than nothing. Big winners for the month were
Overall, in July, 76.5% of retailers beat Wall Street estimates, while 23.5% missed, according to data from Thomson Reuters. Its same-store sales index was expected to rise just 1.5%, but surprised the Street by jumping 4.3%. Read "July sales upside may bode well for back to school."
Great numbers, but they don't really mean that much.
July makes up only about 30% of second-quarter sales, according to Goldman Sachs retail analyst Adrianne Shapira, and with deep discounts dominating, companies don't make too much of a profit off those sales. We'll see just how much of a bite discounting took when retailers report second-quarter results next month.
But analysts have noticed a mix of both clearance and fashion driving shoppers in July.
"Consumer traffic during the month, in our opinion, was driven by promotional activity throughout the mall," Jennifer Black, who runs a namesake retail research firm, wrote in a note to clients. "We have not seen a slowdown in consumer spending. The more fashion-forward and trend-right the product, the higher the sales, in our opinion."
Janney analyst Adrienne Tennant noted that "extreme heat and fashion newness drove traffic."
The good news is that with inventories clean, retailers can start fresh for the fall and we'll see if the hunger for fashion trumps the love of the deal.
All eyes will be on back to school sales for August. And that's a month that really matters.
-- , commentary editor