A Preview Of Same-Store Sales At The Gap, L Brands

Several retailers release monthly sales metrics to the investment community. Two of the most notable retailers to do so include Gap Inc (NYSE: GPS) and L Brands Inc (NYSE: LB).

Here is what Susan Anderson of FBR & Co. is expecting from the retailers May sales.

Gap: Comps Under Pressure, Promotional Activity In Focus

Anderson estimated Gap will report a same-store sales decline of 1.7 percent, slightly better than the consensus estimate of a 1.8 percent decline but worse than the 1 percent gain reported in the same month a year ago.

According to Anderson, weakness in the core-Gap brand continued and was only partially offset by continued momentum at Old Navy.

However, a key theme for the month will likely be the additional flow-through of units for Gap and Banana Republic following port delays that affected March and April deliveries. As such, the analyst observed a heightened promotional activity at Gap and Banana Republic and investors should focus on average unit revenue (AUR) as an indicator for second quarter gross margins, which the analyst is expecting to be down.

Finally, Anderson noted that June's same-store sales comparisons get easier (-2 percent a year ago) before getting more difficult in July (+2 percent). As such, investors should consider remaining on the sidelines and wait for signs of stabilization or a more attractive entry point before entering a position.

L Brands: Continued Comp Execution, Margin Progress

Anderson estimated L Brands will report a same-store sales gain of 2.7 percent, slightly better than the consensus estimate of 2.6 percent but short of the 3.0 percent reported in the same month a year ago.

According to Anderson, L Brand's "consistent" underlying execution continued in to the month and was helped by "good" U.S. weather and industry wide strength in apparel in which the company likely outperformed its peers. As such, the May setup appears "favorable" with potential upside to the low single-digit comps driven by strong Mother's Day related sales at Bath & Body Works and continued PINK strength at Victoria's Secret.

Anderson said the company is expected to report merchandise margin improvements, driven by Bath & Body Works (merchandise margin flat from last year) and Victoria's Secret Direct (mix shift into higher-margin categories).

Bottom line, given the approximate 6 percent sell-off in shares over the past month, comp upside to the mid- to upper-range of mid-single digits in conjunction with strong merchandise margin expansion and inventory control could act as a positive catalyst by investors.