Retail traffic was less than expected in July

By Leslie Earnest

Aug. 10, 2007 12 AM PT

Times Staff Writer

Most U.S. retailers didn’t ring up as much in sales as expected in July, and the stock market’s unpredictability is raising concerns that people may shun the malls this month, the most important of the back-to-school season.

Sales at stores open a year or more inched up 2.6% in July from the same month last year, according to the International Council of Shopping Centers’ tally of 48 major chains, which was released Wednesday.

The council’s chief economist, Michael Niemira, had predicted a rise of 3% or slightly more. (In July 2006, there was a 3.9% gain from the year before.)

Consumers, worried about the housing market and continuing to feel some pinch from the cost of gasoline, are being put off by financial markets too.

“It’s very volatile,” Niemira said. “Volatility is not good from the consumer standpoint.”

To entice shoppers in July, many retailers slashed prices, which can hurt profits.

Some of the gloomiest news Wednesday came from California companies. For example, high-end gadget seller Sharper Image Corp. of San Francisco saw sales sink 15%, twice as much as Wall Street was expecting. Sales at Gap Inc., also based in San Francisco, fell 7%, more than the 4.9% anticipated, as its Old Navy division dragged down sales. The nation’s largest specialty apparel seller, which had said earlier that it would lay off some of its 150,000 workers, said Thursday that it had eliminated about 2,000 positions since the start of the year. About 550 of the jobs cut were linked to the closure of the Forth & Towne chain.

Local teen retailers had a tough month.

Surf and skate apparel seller Pacific Sunwear of California Inc., which has been battling the expanding Zumiez and Hollister chains, posted a 4.6% drop, a considerable disappointment given the 3.2% gain that analysts had predicted.

The Anaheim-based retailer lowered its profit expectations for the month to 6 to 7 cents a share, from 16 to 18 cents a share. Analyst Mitch Kummetz of Robert W. Baird & Co. said in a note that “the company’s turnaround seems to have stalled yet again.”

Hot Topic Inc., in City of Industry, saw sales fall 7.4%, and Foothill Ranch-based Wet Seal Inc. posted a 7.2% decline.

The news wasn’t all dreary.

Wal-Mart Stores Inc. the world’s largest retailer, posted a 1.9% sales gain, slightly better than expected, and rival Target Corp. said sales were up 6.1%, or 0.2% more than expected.

J.C. Penney Co. logged a 10.8% increase.

Big spenders, who slacked off in June, got a second wind in July, pushing up sales at Saks, Neiman Marcus and Nordstrom, which advanced 14.9%, 8.3% and 9.4%, respectively. That suggests that high-end consumers remain “a source of underlying strength for the industry,” Niemira said in a report.

That could change if the stock market keeps gyrating downward and the housing market continues to worsen.

The number of people visiting stores has been off for most of the year, according to mall watcher ShopperTrak RCT Corp. Foot traffic declined 4% in July from the same month last year, said ShopperTrak’s Bill Martin. He believes shoppers, to save gasoline, are visiting the mall once a month rather than two or three times.

leslie.earnest@latimes.com

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Tepid buying

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

Saks$ +14.9%

J.C. Penney $+10.8

Nordstrom $+9.4

Neiman Marcus$ +8.3

Target $+6.1

Wal-Mart $+1.9

Ross $+1.0

Macy’s $-1.4