Stores Post Tepid Sales In June

Thursday, July 12th 2007, 10:21 am

By: News On 6

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.