Shoppers cautious as tax rebates end
With Americans’ tax-rebate checks about gone, consumers spent cautiously in July as retailers launched the important back-to-school shopping season.
Nationwide, sales at stores open a year or more rose 2.6% in July compared with a year earlier, according to the International Council of Shopping Centers’ tally of 38 chains. It was the latest indicator that retailers might be in for a gloomy holiday season this year, industry experts said.
“I think it really calls into question whether or not the Grinch is going to steal Christmas,” said Ken Perkins, president of research company Retail Metrics Inc. “Consumers are really feeling the pressure on multiple fronts right now. It’s very difficult to look ahead three or four months and know how they’re going to have any new source of funds to save the holiday shopping season.”
Across the Southland, merchants this month have stacked shelves with school supplies, stocked up on fall fashions and reeled in buyers with promises of back-to-school bargains.
At a Wal-Mart store in Santa Ana on Thursday, Kim Niezgodzki, 36, was laden with back-to-school clothes for her 5-year-old son. But the stay-at-home mom from Westminster said she was on a tight budget this year as she showed off the colorful shirts and shorts she’d picked out. Nothing cost more than $5.
“The only reason I’m buying these for my son is because they’re on sale,” she said.
The 2.6% sales increase at stores open a year or more was the same increase as in July 2007 but a slowdown from June’s 4.2% rise.
A Thomson Reuters survey showed that 39% of the retailers it polled beat analysts’ expectations, while 61% fell short.
Americans are getting a break from lower gasoline prices, Perkins said, but credit remains tight, food prices are still high and job losses are continuing to pile up.
“You throw all that into the mix,” he said, “and it’s very difficult to see how consumers are going to be able to ramp up spending.”
In keeping with recent trends, shoppers flocked to warehouse clubs while sidestepping department stores and chains that sell clothes. Sales at discount stores collectively rose 2.3% in July, while wholesale clubs increased 9.5% including gasoline sales, the shopping centers council said.
Industry behemoth Wal-Mart Stores Inc. posted a 3% gain, excluding fuel sales, below the 3.4% that analysts were expecting. The company said in a statement that consumers are spending more cautiously as the economic stimulus checks come to an end. It also said traffic had picked up compared with last year and noted sales increases in grocery, entertainment and health products.
Adam Erskine, 33, who also was shopping at the Santa Ana Wal-Mart on Thursday, said he had been cutting his spending lately by dining out less and riding his bike 12 miles to work to save on fuel. He shops at Wal-Mart, where he buys groceries and household items, about once a week.
“I’m not buying the luxury items I normally buy, so the only shopping I really do is Wal-Mart-type,” Erskine, a parachute rigger from Los Alamitos, said as he browsed the store’s selection of tools. “It’s cheap -- you can’t beat the price.”
Going forward, consumers are likely to remain “very, very price conscious,” said Michael Niemira, chief economist for the shopping center group. “Basics will be more in vogue this year.”
Some apparel sellers posted surprisingly strong results. Topping the list was Los Angeles-based American Apparel, which saw its same-store sales jump 25% over last year, much better than the anticipated increase of 15%.
Some California retailers said they would probably post higher than expected profits in the fiscal second quarter -- or lose less money.
San Francisco-based Gap Inc., parent of the Gap, Old Navy and Banana Republic chains, posted an 11% sales decline in July as all of its units lost ground but said it expected second-quarter profit of 30 to 31 cents a share, instead of the 23 cents that analysts were expecting. For the year, it anticipates per-share earnings of $1.30 to $1.35, instead of the $1.26 analysts expected.
Hot Topic Inc. posted a 2.1% sales decline, more than the 1.3% drop anticipated. But the City of Industry-based retailer said it expected to lose only a penny or two a share, instead of the 3 cents that analysts were expecting.
For August, the shopping centers council predicted a 2% year-over-year sales increase, saying shoppers would continue to be very price-conscious.
“Consumers, when they do their back-to-school spending, are basically going to be buying the bare minimums,” said Britt Beemer, chairman of consumer behavior firm America’s Research Group. “Parents just can’t let their kids go to stores and spend at full price.”
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Consumers flocked to warehouse clubs in July while sidestepping department stores and chains that sell clothes, according to a survey of 38 chains in the U.S.
Year-over-year percentage change in July sales at stores open at least a year
*--* Company Change Costco +10.0% Ross +4.0 Wal-Mart +3.0 Target -1.2 Neiman Marcus -1.7 Hot Topic -2.1 Pacific Sunwear -4.0 Limited Brands -5.0 Saks -5.3 Nordstrom -6.1 J.C. Penney -6.5 Wet Seal -8.2 Gap -11.0 *--*
Sources: International Council of Shopping Centers, Thomson Reuters, Times research
Los Angeles Times