Retailers Continue Winning Streak
Most retailers Thursday reported strong sales gains for July, but they did not keep pace with the heady increases seen in May and June.
Retailers, riding their strongest stretch of sales gains of the decade, had little spring and summer merchandise left over last month for price markdowns. July spending typically is driven by clearance sales.
Fewer markdowns bode well for second-quarter earnings, which analysts said may surpass forecasts for several retailers.
But Neiman Marcus Group Inc., Pier 1 Imports Inc. and teen retailer Buckle Inc. warned that soft July sales would lead to weaker quarterly profits. Pier 1 shares dove $2.88 to $5.88; Buckle shares plunged $9.94 to $18.25.
Gap Inc., usually a stellar performer, reported a modest 2% same-store sales increase for July, raising anew concerns about a near-term spending slowdown. Gap shares slid $3.44 to $39.88.
While unemployment remains low and home sales appear healthy, some economists say rising interest rates may slow consumer spending soon. That concern weighed on many retail stocks Thursday.
“The entire group is breaking down--even the ones with good news--because of macroeconomic concerns,” analyst Brian James of Loomis, Sayles & Co. told Bloomberg News. Loomis owns shares in several retailers, including Federated Department Stores Inc.
Brokerage Lehman Bros. said same-store retail sales overall rose 6.7% in July, while the index calculated by Bank of Tokyo-Mitsubishi Ltd. showed a 6.9% gain. Same-store sales--which are sales at stores open at least a year--are considered the best measure of retail performance.
Lehman retail analyst Jeffrey Feiner said in a report that the yearlong trend of value or discount retailers posting the strongest sales continued, with industry behemoth Wal-Mart Stores Inc. reporting a 9.6% increase in same-store sales. Its shares rose 44 cents to $41.38.
At fellow discounter Kmart Corp., the No. 3 U.S. retailer behind Wal-Mart and Sears, Roebuck and Co., July same-store sales rose 3.8%, in line with expectations.
Same-store sales at another key discounter, Dayton Hudson Corp.’s Target unit, rose 4.3%, well below the 7.4% increase in June.
Dayton Hudson Chairman and Chief Executive Bob Ulrich said July sales at Target matched its expectations, but at the company’s Mervyn’s department stores July sales were below expectations.
At Sears, domestic same-store sales in July rose a slim 0.9%, below expectations for a 2% increase.
“Those that are highly sensitive to seasonal inventory, like department stores, cleared out in May and June and were light in stock during July, so low comp [same]-store increases are good,” said Thomas Tashjian, Banc of America Securities retail analyst. “High comp increases probably meant they were clearance-oriented, so that can be deceiving.”
Other July results:
* Sales at Federated, owner of Macy’s, Bloomingdale’s and others, were up 4.7%.
* May Department Stores Co., which also operates Lord & Taylor and Filene’s, rose 1.9%.
* J.C. Penney Co. was up 4.1%.
* Ann Taylor Stores Corp. was up 7%.
* Dillard’s Inc. rose 5%.
