THE ECONOMY : Retailers Post Modest 4.6% Sales Gain in July
The nation’s major retailers Thursday posted minor to moderate July sales gains, with some chains benefiting from further good results in women’s apparel.
But the sales growth at store chains around the country partly reflected improvements from weak business last summer and didn’t imply that a rebound in consumer spending has begun, retail industry analysts said.
Although July is normally a slow time for shopping, analysts keep track of monthly sales figures from department stores, mass merchandisers and discounters for clues about consumer behavior. Consumer spending supplies about two-thirds of the power for total economic activity.
A relatively poor performance by industry leader Sears, Roebuck & Co. illustrated the consequences of the sluggish pace of consumer spending. Sears’ tiny sales increase of 0.4% held down the industry’s average.
An index compiled by investment firm Drexel Burnham Lambert Inc. showed that sales at 40 general merchandise chains, apparel and furniture retailers rose 4.6% in July following June’s 4.7% rise.
Strong Sales in 1988
Michael Bozic, chairman of the Sears merchandise group, said overall results were adversely affected by softness in sales of durable goods, which are expensive items such as ovens or dishwashers that consumers typically refrain from buying when they feel financially pinched.
Consumers have reacted to rising mortgage payments and other credit costs lately by curtailing shopping trips or postponing purchases of items usually financed with loans until interest rates recede.
Bozic said Sears’ sales last month were being measured against fairly strong figures for the company in July, 1988, which made the percentage growth appear weaker than it was.
In contrast to Sears’ weak performance, the second-biggest U.S. retailer, K mart Corp., reported that business momentum continued to build; third-ranked Wal-Mart Stores Inc. outperformed the industry, as it usually does.
The pickup in sales at K mart that began in June continued into July, said Joseph E. Antonini, chairman and chief executive.
K mart had suffered through several disappointing months earlier this year when Sears created a stir with its new everyday low-pricing policy to win back market share from discounters.
No Upturn in Spending
Drexel’s Jeffrey Edelman said retailers specializing in women’s wear had the best news to report. Women have been updating their wardrobes this year after boycotting fashions for two years.
He said discounters also did better than earlier this year. “But I would not look at this as an indication that there’s been an upturn in consumer spending,” Edelman said.
Jeffrey Feiner, an analyst at Merrill Lynch & Co., said the sales gains were “in general modest and to a large degree reflected the generally sluggish overall economic environment.”
With tallies coming in below plan for many months of 1989, retailers will face extra pressure to capitalize on business during the rest of the year as the peak shopping season arrives. Shopping usually picks up in August with back-to-school promotions and gathers momentum to Christmas.
Between 65% and 75% of retailers’ annual earnings come from business done in the second half of the year.
Many industry analysts don’t expect lower sales to damage retailers’ profitability much this year because store managers are controlling expenses and keeping inventories of unsold merchandise as low as possible.
The figures reported Thursday were from major general merchandise chains and apparel retailers. The government’s monthly retail sales report is more comprehensive, including sales at auto dealers, supermarkets, restaurants and elsewhere.
MAJOR RETAILERS’ SALES IN JULY
In millions of dollars 1989 % change Sears 2,401 +0.4 K mart 2,069 +6.2 Wal-Mart Stores 1,983 +24.0 J.C. Penney 932.0 +12.0 Dayton Hudson 896.0 +15.6 May Dept. Stores 557.3 + 8.1 Melville Corp. 510.9 +7.8 Woolworth* 339.0 +9.7 Limited Inc. 292.5 +12.0 TJX** 132.6 +12.0 Montgomery Ward 332.6 + 0.5 Carter Hawley Hale 180.7 + 4.9
* Excludes foreign sales. ** Formerly Zayre
