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Stock Strategist

Retailers Ring Up September Surprise

Overall, September was a pretty positive month for retailers. Get our store-by-store take on the numbers.

September same-store sales results showed generally positive news for retailers, who have been struggling mightily under the weight of lower consumer spending. Below is our retail equity analysts' take on the individual results.

 Aeropostale  | +19.0%
Aeropostale's value proposition continues to resonate well with teens, a trend we expect will drive strong sales during the holiday shopping period.

 Ross Stores (ROST) | +8.0%
Better-than-expected results were driven by increased traffic as value-conscious consumers turned to this off-price retailer for discounted brand name products. Strong near-term sales are expected.

 TJX (TJX) | +7.0%
Increased traffic drove an impressive 7% jump in same-store sales for the month, exceeding our expectations. Strong sales are likely through the remainder of the year given the company's value proposition of brand-name goods at rock-bottom prices.

 Kohl's (KSS) | +5.5%
An increase in comparable-store sales in all regions helped drive an impressive September comp. While a shift in the back-to-school shopping season from August to September this year contributed to the strong performance, the retailer continues to benefit from its value-priced positioning, a trend we expect will continue in the near term.

 Limited Brands (LTD) | +1.0%
Bath & Body Works posted a 5% increase in same-store sales, while Victoria's Secret struggled with a low-single-digit comp decline. We expect Victoria's Secret will continue to be promotional to drive sales, which is likely to weigh on margins in the near term.

 Costco (COST) | +1.0% (+4.0% ex-gas. FX)
Fiscal 2010 got off to a solid start in September, with total comparable-store sales increasing 1%. We expect gasoline deflation and foreign currency translation to be less of a head wind in coming periods, resulting in low-single-digit comparable sales for the year.

 American Eagle Outfitters (AEO) | 0.00%
After two years of consecutive comp declines, American Eagle posted positive comps in all regions except in the West and Southeast. Easier year-over-year comparisons should help results for the rest of the year.

 BJ's  | -0.5% (+5.5% ex-gas)
Traffic remained strong in September, increasing 7% (excluding gasoline sales). However, price deflation weighed down the average transaction size in several high-velocity categories such as food and televisions. Price deflation should be a head wind for the remainder of the year, with easing starting early next year.

 Gap (GPS) | -1.0%
Old Navy posted an impressive 13% increase in same-store sales, partially due to a 5% increase in customer traffic. However, Gap continued to struggle with an 8% comp decline, while comps at Banana Republic were down 12%. Through the remainder of the year, we expect similar trends.

 J.C. Penney  | -1.4%
Sales in women's apparel, shoes, and children's apparel were strong while demand for fine jewelry was weak. A shift in the back-to-school shopping period to September this year and the lapping of a 12.4% comp decline in September 2008 helped ease the monthly comp decrease. Sales are likely to remain weak through the year.

 Target (TGT) | -1.7%
Same-store sales trends continue to improve on a sequential basis. Sales of consumables were strong in the month with apparel sales showing signs of life. We expect sales of everyday items to remain solid through the next couple quarters with improving trends in more discretionary categories like apparel, hardlines, and home goods.

 Macy's (M) | -2.3%
Sales remain weak but are trending slightly better than expected for 3Q. We anticipate soft demand for discretionary goods will continue to result in sales declines through the remainder of 2009.

 Nordstrom (JWN) | -2.4%
Demand for high-end goods continues to be soft. While same-store sales are showing signs of sequential improvement, the company is lapping easier comparisons (a 9.6% drop in same-store sales in September 2008) and is likely benefiting from a shift in back-to-school shopping more into September this year. We expect same-store sales to decline over the next couple of quarters.

 Saks  | -11.6%
Weak sales across all merchandise categories weighed on the top line in September. Soft demand for luxury goods is likely to continue through the remainder of the year.

 Abercrombie & Fitch (ANF) | -18.0%
While comparable sales are trending better than the 30% declines in the prior months, the premium-priced teen retailer continues to be hurt by consumers trading down, a trend we expect to continue in the near term. 

Company Ticker Same-Store Sales Change Total Sales Change Total Sales (Millions) Aeropostale ARO 19.0% 28.0% $187 Ross Stores ROST 8.0% 12.0% $629 TJX TJX 7.0% 8.0% $2,000 Kohl's KSS 5.5% 9.6% $1,464 Limited Brands LTD 1.0% -2.8% $655 Costco COST 1% (4% ex-gas, FX) 3.0% $6,850 American Eagle Outfitters AEO 0.00% 7.0% $246 BJ's BJ -0.5% (5.5% ex-gas) 4.1% $928 Gap GPS -1.0% -1.0% $1,330 J.C. Penney JCP -1.4% -0.6% $1,438 Target TGT -1.7% 1.3% $5,392 Macy's M -2.3% -2.4% $2,043 Nordstrom JWN -2.4% 0.3% $720 Saks SKS -11.6% -10.2% $242 Abercrombie & Fitch ANF -18.0% -10.0% $248

Kimberly Picciola does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.