July Retail Sales Are Mixed As Summer Selling Winds Down, Fall Begins
August 04 2011 - 7:29AM
Dow Jones News
Retailers are turning in mixed sales for July, a transitional
month that offers early indications of back-to-school demand amid
margin-cutting summer clearance sales.
The goal for the month was to get ready for fall, so a lot of
summer merchandise was relegated to markdown racks as retailers
brought in products for the important school-buying season. The
figures that retailers are reporting suggest spotty success.
Trying to balance the two seasons was complicated by fall
merchandise coming in at higher prices in some cases as increased
cotton costs hit.
"Retailers certainly are dealing with higher costs and are
taking steps to avoid shocking consumers," said Alison Paul, U.S.
retail leader at Deloitte. "But there is no question prices will
have to be raised."
One thing potentially complicating retailers' efforts was July's
extreme heat, which encouraged shopping for warm-weather clothing
but may have hindered purchases for fall. This was the warmest July
nationally since Planalytics, a weather-tracking firm, began
following temperatures in the U.S. in 1960.
The 25 retailers tracked by Thomson Reuters are expected to
report 4.3% growth in July same-store sales. The figure is off from
a relatively modest 2.8% gain a year earlier.
Since July is the last month of the second quarter for most
retailers, a number of them are telegraphing how their results for
the period will be.
Limited Brands Inc. (LTD) posted a 6% rise in July same-store
sales, when 4.2% was expected. The operator of Victoria's Secret
and Bath & Body Works raised its earnings projection to 44
cents a share to 46 cents a share, from 38 cents a share to 43
cents a share.
Hot Topic Inc. (HOTT) reported a 7.3% rise in same-store sales,
when 0.5% was projected, with the gain aided by merchandise related
to the latest blockbuster "Harry Potter" movie. The teen retailer
shaved the amount it expects to lose in the second quarter to 8
cents a share from 9 cents to 11 cents.
Macy's Inc. (M) and Nordstrom Inc. (JWN) have yet to report but
have been mentioned by analysts as possibly lifting their
expectations.
Costco Wholesale Corp. (COST) said its same-store sales rose
10%, when 8.6% was expected, with much of the increase due to
inflation in gasoline prices and strengthening foreign
currencies.
Regional department-store chain Stage Stores Inc. (SSI) reported
comparable store sales grew by 0.8% in July when analysts had
projected a 2% rise.
Destination Maternity's (DEST) July same-store sales dropped
7.3%, just beating the 7.5% decline analysts were looking for.
Buckle Inc. (BKE), which came into the day with expectations for
the biggest comparable-store sales rise, at 10.5%, ended up
reporting a 6.8% increase. Fellow teen retailer Zumiez Inc.'s
(ZUMZ) also missed, with an increase of 4.9%, when 7.5% was
projected. The retailer was among those that said they saw a
slowdown in the back half of the month, seeing a roughly 7% rise in
the first two weeks that was roughly halved in the second two
weeks.
It is unlikely any retailer can expect a completely smooth ride
ahead. During July, gas prices remained elevated, home prices
stayed near their lows, unemployment rose and the debt-ceiling
debate in Washington had some negative impact late in the
month.
"All of this has put the consumer in a tenuous mood going into
the back-to-school season," said Patrick McKeever, retail analyst
at MKM Partners.
While total spending is expected to reach $68.8 billion, the
average family with school-age children will spend about $604 on
back-to-school materials, a few dollars less than last year,
according to the National Retail Federation. Almost 30% of
consumers said they would make do with last year's school items to
save money. Back-to-school spending is surpassed only by purchases
during the Christmas holidays.
-Caitlin Nish contributed to this article
-By Karen Talley, Dow Jones Newswires; 212-416-2196;
karen.talley@dowjones.com
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