NEW YORK (AP) - Retailers' hopes for a successful back-to-school
shopping season grew dim Thursday after they reported generally modest sales
gains for June, extending a string of disappointments that began last winter.
As merchants reported their sales results Thursday, it was clear that
consumers' uneasiness about higher good and gas prices and the weakening housing
market was forcing many to think twice before spending on non-essentials --
although consumer electronics like MP3 players and flat-screen TVs had a good
month.
The disappointments included Macy's Inc., AnnTaylor Stores Corp. and trendy
apparel chain Bebe Stores Inc. A notable exception was Wal-Mart Stores Inc.,
whose renewed emphasis on low prices helped drive sales gains above analysts'
expectations.
Sales were not as weak as some analysts feared, but the fact that June, the
second most important month in the retail calendar, was nonetheless sluggish did
not augur well for back to school shopping that begins this month.
Ken Perkins, president of RetailMetrics LLC, a research company in
Swampscott, Mass., said shoppers are "facing a long list of headwinds as they
head into the rest of the summer."
Most obvious for most consumers is how much they're paying for gasoline --
prices at the pump that fell after peaking in late May are again rising, and the
national average price for a gallon of unleaded regular is above $3.
Still, there were mitigating factors that might help some retailers out in
the months ahead -- teens were spending again in June after a slower spring.
That improvement was reflected in reports from retailers including Pacific
Sunwear of California Inc. and Abercrombie & Fitch. And despite the concerns
about back-to-school, J.C. Penney Co. said it saw a good response to its early
fall merchandise.
The International Council of Shopping Centers-UBS sales tally of 50 stores
rose 2.4 percent in June, compared to a 3.0 percent gain in the year-ago period.
The tally is based on same-store sales, which reflect business at stores open at
least a year and are considered a key indicator of a retailer's health.
June's results extended the slowing trend retailers have experienced since
February.
For some stores, June results were depressed in part by a shift in the
calender that moved the Memorial Day weekend business into May. But retailers of
what are known as discretionary merchandise such as apparel and home goods are
also coming under increasing pressure as consumers are forced to pay more for
food and gas. The still-weakening housing market is also making shoppers shy
about spending.
Meanwhile, apparel merchants have problems of their own, including a
continuing absence of must-have fashions and competition from the latest
electronic gadgets.
Craig R. Johnson, president of Customer Growth Partners, a retail
consultancy in New Canaan, Conn., said hot gadgets like Apple Inc.'s iPhone are
keeping sales of consumer electronics strong. The iPhone retails for $499 to
$599 and combines a cell phone, media player and wireless Internet service.
"The fashion must-haves of the world are not apparel, but the iPhones of the
world," said Johnson. "They are wearing technology as fashion."
The fact that the labor market is healthy is lending support to overall
consumer spending levels. The Labor Department said Thursday the number of
laid-off workers filing unemployment claims dropped to 308,000 last week, the
lowest level in almost two months and a decline of 12,000 from the previous
week.
Wal-Mart, the world's largest retailer, had a 2.4 percent gain in same-store
sales, beating the 0.8 percent predicted by analysts polled by Thomson
Financial. The company said its aggressive price reduction strategy helped boost
results, and it promised more aggressive price cuts for the back-to-school
season.
"Consumers continue to be challenged financially, with more pressure on
discretionary spending," said Eduardo Castro-Wright, Wal-Mart Stores U.S.
president and chief executive officer, in a statement. "Gas prices have moved to
be their chief concern in our latest survey and they appreciate the opportunity
to save on everything."
The company said grocery sales continue to be stronger than general
merchandise. One exception was the entertainment category; flat-panel
televisions, MP3 players and video game hardware enjoyed stronger gains compared
to a year ago. Still, Wal-Mart continues to struggle with weak sales in its home
and apparel areas.
Target Corp. had a 3.3 percent gain in same-store sales, in line with
forecasts.
Meanwhile, Costco Wholesale Corp. reported a 6 percent gain in same-store
sales, in line with the 6.1 percent estimate.
Department store operator Macy's suffered a 2.7 percent drop in same-stores
sales, worse than the 0.8 percent decline expected. Macy's lowered its
second-quarter guidance due to lower-than-expected sales.
J.C. Penney had a 1.5 percent decline in same-store sales in its department
store business, less than the 3.6 percent analysts expected. The retailer said
sales picked up toward the end of the month, reflecting a strong initial
response to its back-to-school merchandise.
Limited Brands Inc. had a 3.0 percent gain, slightly better than the 2.9
percent forecast.
AnnTaylor suffered an 8.4 percent drop in same-store sales, dragged down by
its lower-priced Loft division. Analysts expected a 4.7 percent decline.
Among teen retailers, Pacific Sunwear of California Inc. posted a 4.5
percent same-store sales increase, better than the 3.2 percent estimate.
Abercrombie & Fitch had a 2 percent gain in same-store sales; analysts had
expected a 2.8 percent decline.
But Bebe posted a 5.4 percent drop in same-store sales, worse than the 2.2
percent projected decline.
On Wednesday, American Eagle Outfitters Inc. reported a hefty 8 percent
same-store sales gain, beating the 4.4 percent estimate.
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