U.S. retailers hope the summer doldrums don't extend into the fall.
With one week left in August, retail industry watchers are predicting that the month's same-store sales will be lower than expected. Relatively high gasoline prices and tightening credit have conspired to make the 2004 back-to-school shopping season "not exactly ebullient," as Kurt Barnard, president of Barnard's Retail Consulting Group in New Jersey, put it Monday.
That was evident when Wal-Mart Stores Inc., the world's biggest merchant, lowered its August sales forecast, citing disappointing demand as well as the effect of Hurricane Charley.
Wal-Mart, which had forecast a 2% to 4% increase, now expects August sales at U.S. stores open at least a year to range from flat to a 2% increase.
After that announcement Monday, Wal-Mart shares fell 85 cents, or 1.6%, to $53.80 on the New York Stock Exchange. The Morgan Stanley retail index of 38 retailers declined 0.7%. And after the market closed, Target Corp. said its August same-store sales would also be flat to up 2%, although that was in line with expectations.
The shopping news isn't all bad. Last week, J.C. Penney Co. said its early back-to-school sales had been better than anticipated, although it cautioned that energy prices and terrorism worries could sap consumer spending.
Among the state's top retailers, Anaheim-based Pacific Sunwear of California Inc., a leading surf wear merchant, told analysts this month that sales for the first eight days of August were up 3.3%, at the high end of its previous forecast of 2% to 4%, and predicted that September same-store sales would increase 8% to 10%.
But Wal-Mart's report served to cast doubt on the strength of overall U.S. consumer spending in a crucial shopping season. Last year, back-to-school sales totaled about $40 billion, versus $210 billion posted during the Christmas season, according to the National Retail Federation trade group.
Of course, it would be hard to beat August 2003, when many Americans were flush with tax rebate checks from Uncle Sam.
Still, even taking that into account, this school shopping term "is off to a slower start than we have expected," said analyst Adrienne Tennant of Wedbush Morgan Securities Inc.
Some of the biggest back-to-school receipts are typically rung up during the two weeks before Labor Day, however, and that holiday is relatively late this year. Many schools won't begin their year until the week of Sept. 6.
"Some of that shopping will get shifted into the first two weeks of September," Tennant said.
Michael Niemira, chief economist for the International Council of Shopping Centers, said he planned to lower his forecast for the two-month period in a report due today. At the beginning of August, he predicted back-to-school sales for 70 U.S. chain stores would rise 3% to 4% over the previous year. Now, he said, that will "likely to be closer to 3%."
"Clearly, we feel a softer tone in a lot of the numbers," Niemira said. "The energy price story is taking a toll."
The average price of gasoline in the U.S. edged up nearly a penny, to $1.884 a gallon in the last week, the Energy Department said Monday. That was 13.7 cents higher than a year ago, and several East Coast cities are still paying 15 cents to 20 cents a gallon more than a year earlier.
Economists estimate that higher energy prices have slowed U.S. growth by one percentage point over the last year, curbing consumers' purchasing power proportionately. In the second quarter, the growth of consumer spending slowed to a 1% annual rate, from 4.1% in the preceding three months.
Last August, same-store sales were up 5.5% from August 2002, according to a survey of 20 chain stores by Robert Buchanan, a retail analyst for A.G. Edwards & Sons. That was in large part because of the federal government's issuing some $14 billion in child tax credits to stimulate spending.
This year, Buchanan reckons, there will be an overall 1.5% same-store sales increase in August among the 20 chain stores.
"That would make August the worst month since February 2003," he said. "It's tough out there."
For their part, the retailers are maintaining a bullish outlook for August and September. In a recent survey, they predicted that in the end, the average family would wind up spending $483.28 on back-to-school items -- 7% more than the $450.76 average in 2003.
"Parents," said National Retail Federation spokeswoman Ellen Tolley, "want their kids to go to school prepared."