Weak retail sales in June raise worries

Weak retail sales in June raise worries

By ANNE D'INNOCENZIO – 5 hours ago

http://www.google.com/hostednews/ap/article/ALeqM5jEUOBuLQexhEw6Sbb1sU7mSLR6iAD99B0MO01

NEW YORK (AP) — Rain and escalating job worries dampened shoppers' appetite for summer staples like shorts and dresses more than expected in June, increasing concerns about the back-to-school shopping season.

Retailers in all sectors reported weak same-store sales Thursday, but mall-based clothing stores suffered most in June compared with a year earlier, while some discounters scraped by.

Even low-priced Costco Wholesale Corp. saw same-store sales decline from last year, when federal stimulus checks helped business. Wal-Mart Stores Inc. no longer reports same-store sales each month.

Same-store sales — sales at stores open at least a year — are considered a key indicator of a retailer's health.

"Consumers are under severe pressure on the job front, so discretionary spending is just not happening, "said Ken Perkins, president of retail consulting firm Retail Metrics LLC.

"This is not setting up well for the back-to-school season."

The International Council of Shopping Centers-Goldman Sachs same-store sales tally for June was down 5.1 percent from June 2008, worse than the latest forecast for a 4.5 percent decline. The results were slightly below the sluggish average pace of 4.4 percent seen since February, the start of retailers' fiscal year.

A factor depressing results was the weather. Many areas from the West Coast to the Northeast received two or three times their normal June precipitation last month, according to National Oceanic and Atmospheric Administration's National Climatic Data Center.

But financial worries are clearly discouraging shoppers. While the number of newly laid-off workers filing initial claims for jobless benefits last week fell to the lowest level since early January, that was largely due to changes in the timing of auto industry layoffs.

Continuing claims, meanwhile, unexpectedly jumped to a record high. And jobs remain scarce. The latest federal report, which showed wages shrinking and higher job losses than expected in June, is increasing concerns about consumers' ability to spend in the months ahead.

Merchants are relying more now on shoppers' paychecks to fuel purchases because consumers' two other key sources of funding — credit cards and home equity loans — have shrunk. But, seeing their earnings dwindle, shoppers are continuing to seek 70 percent discounts.

Job worries caused consumer confidence, as measured by the nonprofit Conference Board, to drop in June, reversing a three-month upward trend fueled by a stock market rally that also is fizzling.

Among the biggest disappointments in Thursday's same-store sales reports were teen stalwart Abercrombie & Fitch Co., The Children's Place Inc. and Limited Brands Inc., which owns Victoria's Secret.

Wal-Mart, the world's largest retailer, has benefited from the recession as shoppers scour for deals and focus on necessities. The Bentonville, Ark.-based company stopped releasing monthly data after its report for April.

But discounter Target Corp., which has been stumbling because of its reliance on nonessentials like trendy jeans and towels, reported a 6.2 percent decline in same-store sales for June. Analysts surveyed by Thomson Reuters expected a 5.6 percent drop at the Minneapolis-based retailer.

But Target expects to meet or exceed analyst expectations for second-quarter profit due in part to spending cuts.

Costco said Thursday that its June same-store sales dropped 6 percent, meeting Wall Street's expectations. The company said in a recorded message that some of its strongest categories included food products, such as deli items, frozen food and candy. It experienced weakness in nonfood, discretionary categories.

TJX reported a 4 percent gain in same-store sales, exceeding analysts' average forecast of a 0.6 percent decline. TJX raised its second-quarter earnings outlook. Ross posted a 1 percent gain in same-store sales, better than the 0.6 percent estimate.

Among department stores, J.C. Penney Co. posted an 8.2 percent drop in same-store sales but beat Wall Street's estimate of a 9.3 percent decline. The chain also narrowed its loss estimate for the second quarter. Macy's Inc.'s 8.9 percent drop was slightly smaller drop than analysts expected.

Privately held luxury department store Neiman Marcus Group Inc. posted a 20.8 percent drop in same-store sales. Its rival, Saks Inc., reported a 4.4 percent decline, beating Wall Street's expectations for a steeper drop after getting a boost from a designer sale event.

Limited Brands' 12 percent drop was worse than the 7.9 percent decline analysts had expected. Gap Inc. posted a 10 percent decline in same-store sales, worse than the expected 8.6 percent drop.

Many teen stores had a challenging month, raising concerns about how much parents will spend on back-to-school merchandise. Abercrombie & Fitch Co.'s same-store sales fell 32 percent, even more than the 26.6 percent decrease Wall Street projected.

Even retailer The Buckle Inc., which has had 22 months of consecutive double-digit same-store sales gains, according to Perkins, saw its gains slow last month. The accessories and footwear store reported a 9.6 percent rise, missing the 12 percent forecast.

AP Economics Writer Christopher S. Rugaber contributed to this report.

Copyright © 2009 The Associated Press. All rights reserved.

 

lower consumption means less competition in the long run and higher costs. so although it is deflation at present it will end with higher prices and less employment. enjoy low prices while you can it won't last that long. take advantage of the current situation and buy non perishable essentials.