State Economy Dampens June Retail Spending
Underscoring the continuing reluctance of consumers to spend freely in the face of persistent recession fears, the nation’s largest retailers Thursday reported lackluster sales in June. Merchants and analysts said the results were dragged down by the worsening California economy.
“We have a high unemployment rate, continuing defense layoffs and a residential real estate market that still hasn’t stabilized,” said Philip Hawley, chairman of Carter Hawley Hale, operator of the Broadway and two other department store chains in the state. “The state needs to settle down before retail sales will improve.”
Dayton Hudson, operator of Mervyn’s and Target stores, said sales in its California stores continue to lag those in the rest of the nation. Analysts said other national retailers with California stores, including Macy’s, May stores and Kmart, followed the trend.
Still, some analysts found a few encouraging signs in other parts of the nation, including stronger than expected sales among department stores and apparel retailers, two groups that were particularly hard hit by the recession.
But, in general, analysts said cooler than usual weather throughout much of the East and Midwest in June, coupled with consumer jitters in other parts of the nation, contributed to the overall sales weakness.
Some analysts said the recent wave of airline fare cuts could have prompted consumers to buy travel tickets with money they might otherwise have spent at the mall, while others noted that retail sales plummeted in the final two weeks of June, just as auto sales picked up dramatically.
“The increased auto sales could affect customers’ willingness to shop,” said Thomas J. Tashjian, an analyst with First Manhattan Co.
According to Tashjian, the pace of shopper demand during the first three months of the year was stronger than during the second quarter, leading many analysts to wonder if the consumer-led end to the recession that the Bush Administration had been hoping for will emerge.
“The consumer remains cautious in the current economic climate,” said Robert U. Ulrich, chairman of Target discount stores, a division of Dayton Hudson Corp.
Tashjian noted that discount stores, which have generally fared better than other retailers in the downturn, showed some weakness in June.
Kmart said sales at its stores open at least a year rose 2.2%, while overall sales rose 7.2%. Sales from stores open at least a year--also known as same-store or comparable-store sales--are considered a more accurate assessment of a retailer’s performance than overall sales. New stores tend to have extraordinarily strong business that can distort a retailer’s results.
The nation’s largest retailer, Wal-Mart Stores Inc., reported same-store sales rose 8%, while overall business was up 23%. Sears, Roebuck & Co. said same-store sales were down 2.6%, while overall business was down 2.2%. Sears said cooler weather that continued in some parts of the nation eroded demand for air conditioners and other seasonal merchandise.
J. C. Penney Co.’s business continued to improve, with same-store sales at its flagship stores rising 11.2%. The company said overall sales, including catalogue and drug store business, rose 11.4%.
Dayton Hudson said same-store sales rose 2.1%, while overall sales picked up 9.9%. May Department Stores said same-store sales rose 3.3%, while overall business picked up 8%.
