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Shoppers remained tight-fisted in July,
resulting in sluggish sales for many merchants and raising concerns 
about the health of the back-to-school shopping season.
      

As merchants reported their sales figures Thursday, mall-based
chains continue to be hit hardest as consumers focus on
necessities. 


Among the disappointments were Macy's Inc. and teen
retailers Abercrombie & Fitch Co. and Wet Seal Inc.


Minneapolis-based Target Corp., which has been stumbling because of its reliance
on nonessentials like trendy jeans, posted a 6.5 percent drop,
worse than the 5.8 percent decline analysts had expected.

      Among the few bright spots was discounter TJX Cos., operator of
the T.J. Maxx and Marshalls chains, which reported a sales gain
that exceeded Wall Street estimates.

      "The consumer is stressed and depressed," said Ken Perkins,
president of retail consulting firm Retail Metrics.
"Back-to-school shopping season is going to be very late."

      Shoppers' worries about job security, retirement accounts and
slumping home prices have made them focus on necessities like food
and other basics. 


But stores are also grappling with a newly
adopted frugality as consumers - even those with secure jobs -
learn how to save money and stick to a budget.

      A number of special factors also depressed July's sales results.
Lean inventories left fewer clearance options for bargain hunters,
as stores wanted to protect themselves from getting stuck with
piles of leftovers. 


And the shift of the sales-tax holidays from July
to August in most of the 14 states that have them because of a late
Labor Day weekend also stole momentum from July.
     


 Frank Badillo, senior economist at consulting group TNS Retail
Forward, and other analysts have also noted that the uptick in car
buying spurred by the government's "cash for clunkers" program
might siphon sales from other categories like clothing and home
furnishings. That could hurt back-to-school shopping as consumers
shift available cash to car payments.

      A monthly compilation of more than 50 retailers' results by The
International Council of Shopping Centers and Goldman Sachs showed
overall same-store sales fell 5.0 percent in July compared with the
year-ago period. Same-store sales are sales at stores open at least
a year and are considered a key indicator of a retailer's health.

      July's pace was in line with the 5.1 percent drop in June and
worse than the 4.5 percent decline averaged since February, the
beginning of retailers' fiscal calendar.


            July's decline marks the 11th consecutive monthly drop when
excluding Wal-Mart results - which had buoyed the industry in the
spring before it stopped reporting monthly numbers.

      Merchants are seeing indications that sales decreases are
easing. However, business remains weak even amid signs of economic
stabilization.

      A worrisome sign for merchants - and the broader economy of
which consumer spending makes up 70 percent - is a 1.2 percent
decline in consumer spending and a 5.2 percent increase in the
savings rate in the second quarter.

      That's been driven by worries about a weak job market that have
hammered consumers' confidence. When the Labor Department releases
its monthly jobs report Friday, economists expect it to show
unemployment ticked up to 9.6 percent in July, close to its
post-World War II high.


     Even among the discounters, shoppers still remain frugal when
buying nonessentials, though there may be signs of easing.


      As club operator Costco Wholesale Inc. reported Thursday that
its same-store sales dropped 7 percent in July, pressured by lower
gas prices and the stronger dollar, the retailer said some of its
strongest categories were food, including deli, candy and frozen
food.

      It reported weakness in non-food, discretionary categories but
did note a slight improvement in some areas such as office,
sporting goods, small appliances and men's and women's apparel.


      TJX's 4 percent gain beat Wall Street's expectations for a 2.3
percent increase. It also raised its second-quarter profit outlook.


      Among department stores, Macy's reported a 10.7 percent drop in
same-store sales, worse than the 9.1 percent drop that was
expected. 


J.C. Penney's 12.3 percent same-store sales decrease was
a bit steeper than the 11.4 percent decline that analysts had
expected. But Penney raised its earnings outlook.

      Among teen retailers, Abercrombie & Fitch posted a 28 percent
same-store sales decline, worse than the 26.9 percent drop that
analysts expected. Wet Seal reported a 12.1 percent drop, worse
than the 10 percent decline that analysts expected.

Gallery

Business and Economic News

Shoppers remained tight-fisted in July,
resulting in sluggish sales for many merchants and raising concerns about the health of the back-to-school shopping season.

Retail sales still in a slump

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