Slow Growth in Retail Sales Spurs Concern

Retail sales growth stalled in June, leaving merchants wondering whether shoppers who were resilient for much of the year are curbing their spending because of higher gasoline prices.

As merchants issued their sales reports Thursday, disappointments included Wal-Mart Stores Inc. and Federated Department Stores Inc., which fell short of analysts’ forecasts. Those that exceeded expectations included Target Corp. and J.C. Penney Co.

Rainy weather that wiped out demand for summer clothes also hurt sales at some retailers. And many merchants had to compare their results against very strong business a year earlier, making this year’s sales look slightly weaker than they really were.

Still, some analysts said they saw a loss of sales momentum.

“It’s a mixed bag, but it is definitely slower,” said Jharonne Martis, an analyst at Thomson Financial. “Consumers’ discretionary spending is decreasing as the economy is slowing down.”

Another analyst was more upbeat about shoppers.

“Consumers are still resilient. These numbers tell you that they are still in the stores, in the malls,” said Janet Hoffman, managing partner of the North American retail division of consulting firm Accenture. “They may be trading to different formats, but they are shopping.”

The International Council of Shopping Centers said June sales at 56 retailers rose 2.6% from a year earlier, the low end of the projected 2.5%-to-3% range. The tally is based on sales at stores open at least a year, which is considered a key measure of a retailer’s health.

The results for June were below the 4.3% gain averaged in the first five months of the year.

June, the second-most important month of the year in a retailer’s calendar, behind December, is when merchants start to clear out summer goods to make room for fall merchandise.

Analysts worry that customers are starting to feel the effects of increasing economic pressures, including higher gasoline prices and interest rates.

Economists are closely watching the job market, a key factor in spending, which has remained healthy despite a spring slowdown.

Wal-Mart, whose low-income customers can be especially hard hit by higher energy costs, said sales at established stores rose 1.2% in June from a year earlier.

Tom Schoewe, the retailer’s chief financial officer, noted that Wal-Mart continued to see customers making fewer shopping trips because of higher gasoline prices, while focusing their spending on food and consumables.

Discount rival Target had a 4.8% gain in June, and Costco Wholesale Corp. reported a sales increase of 6%.

June results at department stores, which have been undergoing consolidation, were generally solid. Penney posted a 4.3% gain, and Kohl’s Corp. rose 7.1%. Among higher-end chains, Nordstrom Inc. reported a 4.7% sales increase.

Macy’s parent Federated, which acquired May Department Stores Co. last year, posted a 1.7% increase in sales.

Gap Inc. -- operator of the Gap, Banana Republic and Old Navy chains -- continued to struggle, recording a 6% drop in sales.

Teen retailers reported mixed results. Abercrombie & Fitch Co. saw a 4% decline from a year earlier, and Pacific Sunwear of California Inc. reported a 2.7% drop. But American Eagle Outfitters Inc. had an 11% gain.

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June gloom

Year-over-year percentage change in June sales at stores open at least a year

*--* Company % change Guess +11.7% Gymboree +9.0 Ross +5.0 Target +4.8 Nordstrom +4.7 J.C. Penney +4.3 Bebe +3.5 Limited Brands +3.0 Federated +1.7 Wal-Mart +1.2 Pacific Sunwear -2.7 Hot Topic -3.4 Wet Seal -4.0 Gap -6.0 Sharper Image -26.0

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Sources: Times research, company reports