The industry trade group said overall retail sales were up 2.6% in July compared with the year before, but the growth was mostly among warehouse-like club stores such as Costco and Sam's Club. Clothing shops, department stores, jewelry stores and retailers catering to teenagers all reported declines in sales.
"For years the market strength was in luxury," said Michael P. Niemira, chief economist for the council. "Now it's Wal-Mart."
Although retailers captured early back-to-school shoppers in July, the month's results were dominated by clearance sales of spring and summer merchandise at sharp discounts, Niemira said.
The retail industry's problems have been unfolding in waves, he said, starting about a year and a half ago when undercapitalized mom-and-pop stores began having trouble turning a profit and some had to close. By last summer, many major chains started dialing back their expansion plans or closing stores as the housing market sputtered.
Home furnishing chains such as Wickes Furniture, Levitz Furniture and Sharper Image Corp. have filed for Chapter 11 bankruptcy protection or called it quits.
"Today we're living with the financial crisis aftermath and tightness of credit," Niemira said. "That means a lot of retail real estate deals are not going to happen."
Southern California malls have been hit less hard than those in other parts of the country such as Florida, Arizona and Nevada where many retailers are abandoning their unprofitable stores, said Al Williams of Excess Space Retail Services Inc., a Huntington Beach firm that helps retailers who have rented space they no longer want.
"There hasn't been a precipitous drop yet" in retail rents or property values here, he said, but landlords are getting more generous with rents and concessions to tenants they want to attract or keep.
Some local retail hot spots have fallen victim to their own success, said real estate broker Michael Zugsmith, chairman of NAI Capital Commercial.
"In many prime retail areas like Rancho Cucamonga you have seen a fairly dramatic increase in rental rates in the past five or six years," Zugsmith said. "We're now seeing a point where retail sales can't sustain these rents."
In some areas recently lifted by the housing boom such as the Antelope Valley, Victorville and Moreno Valley, rents are leveling off or declining as much as 20%, Zugsmith said.
