Target, Costco exceed expectations in July

New York -- Costco Wholesale Corp. set the July same-store sales pace when it reported Wednesday a better-than-expected gain of 5%, and other discounters answered Thursday with similar positive results.

Aided by discounts and warm weather in the often-mixed month before back-to-school shopping officially begins, discount chains will give investors something to chew on as July results serve as an early indicator of U.S. demand at the starting gate to the second-biggest selling season of the year. Analysts expect same-store sales to show a rise of 1.5% in July, compared with a year-earlier increase of 4.2%, according to Thomson Reuters.

Target, however, saw a better-than-expected same-store sales increase of 3.1%, paired with a net sales gain for the month of 3.2% to nearly $5 billion.

Target chief executive Gregg Steinhafel credited the company's merchandising strategy, store remodeling and rewards programs with boosting store traffic and sales. The company said food was its strongest category last month, posting a "low double-digit" comparable revenue increase, while health and beauty recorded "mid single-digit" same-store revenue growth.

TJX Cos. posted a same-store sales rise of 7%, prompting the discounter to raise its second-quarter and full-year guidance.

Other key discounter results for July include:

  • Ross Stores recorded a 7% same-store sales increase and increased its second-quarter earnings estimate;
  • Fred’s reported Wednesday that same-store sales rose 1.2%;
  • Cato dipped 2%;
  • Stein Mart increased 2.8%; and
  • Alco edged up 0.1%, excluding fuel.