Retail sales’ growth slows in July
Retail sales cooled in July amid a wave of renewed economic worries, but the nation’s merchants still managed to post a decent month. Investors, however, seemed unimpressed as retail stocks fell on a dismal day for the stock market.
Major chain stores reported a 4.4% rise in sales compared with the same month last year, according to Thomson Reuters’ tally of 25 companies. Sales were in line with Wall Street expectations and were helped by the start of back-to-school season, hot weather and big discounts.
“Even with higher prices from gasoline, apparel and food having inflated the reported sales growth by approximately 2 percentage points, July sales performance was still quite solid,” said Michael Niemira, chief economist of the International Council of Shopping Centers.
Simply put, “consumers shrugged off a steady stream of negative economic data points in July,” said Ken Perkins, president of research firm Retail Metrics Inc.
But that may not continue.
Analysts cautioned that shoppers still needed to prove that they would buy fresh fall merchandise at full price, even as consumer confidence becomes shaky again and as retail groups predict a tepid back-to-school season.
They also noted that July’s results, although good, decelerated from the strong gains posted in prior months this year. In June, for instance, year-over-year sales rose a robust 6.5%.
Wall Street took a dim view Thursday of recent economic news. On a day when the stock market plunged, an index of 30 major retail stocks fell 4.5%
While grabbing a slice of pizza at Costco in Burbank, Kim Thompson, 51, said she had been “hoarding my money” recently because of fears about the economy. The flight attendant from Studio City said she was buying in bulk, using coupons and splitting entrees when dining out.
“I used to feel uncomfortable doing it years ago, but then I started thinking, ‘It’s my money, and I’m going to do what’s best for me and my budget now,’” she said.
Toward the other side of the spectrum was Toban Nichols, 41, who had bought three new tank tops from American Apparel — albeit for 15% off — while shopping on Colorado Boulevard in Pasadena.
“I have been spending more, but I don’t think the economy is getting better,” said the graphic artist from Highland Park. “So I guess that’s kind of stupid of me.”
Discounters performed the best last month, with year-over-year sales surging 7.1%. Apparel sales rose a slight 1.9%, missing expectations for a 2.2% rise. Teen retailers, an important category during back-to-school season, saw sales rise 6.8%.
The month’s top performers were a mix of high- and low-end stores, with sales up 15.6% at Saks Inc., 10% at Costco Wholesale Corp., 7.7% at Neiman Marcus and 7.4% at value-price teen chain Wet Seal Inc. Wal-Mart Stores Inc., the world’s largest retailer, no longer reports sales on a monthly basis.
But notable chains targeting the middle-income consumer struggled.
Gap Inc., which has faced sales weakness for years, reported a 5% decline during a “challenging” month, Chief Executive Glenn Murphy said. Department store chain Kohl’s Corp. said sales fell 4.6%. Both companies missed expectations.
Results are based on sales at stores open at least a year, which are known as same-store sales and considered an important measure of a retailer’s health because it excludes store openings and closings.
July is typically a transitional month for retailers, which clear out summer merchandise to make room for fall and back-to-school items.
At Costco in Burbank recently, Robert and Joana Andrews were doing price comparisons on car tires for their 17-year-old son.
“Before, you would just go to a place that had what you wanted and buy it. Now you really go back and forth to get the best deals,” said Robert Andrews, 48, a retired Burbank resident. “Your money just doesn’t go as far — everything’s expensive.”
With high household costs to contend with, the couple said they planned to cut their son’s back-to-school budget this year.
“We’re backing down a little bit,” he said. “He’s probably going to get half of what he got last year.”
Still, retail analyst Richard Jaffe of Stifel, Nicolaus & Co. said, consumers often say they’ll do one thing and act another way.
“Take consumer confidence with a grain of salt,” Jaffe said. “If you ask the consumer, they say: ‘Of course it’s a tough economy; I’m going to be more prudent. But then I saw a fantastic sweater I had to have.’”
