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Retailers report weak June sales

July 10, 2009|Andrea Chang

Lingering worries about the economy and unemployment put summer shopping sprees on hold last month, leading to worse-than-expected sales declines at many of the nation's retailers and raising fears about the back-to-school season ahead.

Department stores, discounters and apparel chains all saw sales fall in June, with teen clothing stores hit especially hard.

Total retail sales were down 5.1% compared with the same month last year, the International Council of Shopping Centers said Thursday. The group tallied the results of 32 major chain stores.

Given June's unseasonably rainy weather and rising unemployment, sales could have been even more dismal than they were, retail analysts said.

There were a few bright spots as well from off-price retailers Ross Stores Inc. and TJX Cos., which operates T.J. Maxx and Marshalls.

Discount chains have benefited from shoppers trading down to more-affordable stores.

While shopping for sandals at a Ross store in Pasadena this week, Yesenia Lira, a social worker from Monterey Park, said she no longer shopped at stores such as Macy's and Gap.

"I can't remember the last time I went to the mall, to be honest," Lira, 33, said. "I just come here."

Overall, "it's still a very negative picture," said Michael Niemira, chief economist of the shopping-center group. "We're really in search of that turning point. If you're looking for a change in the tide of consumer spending, it'll be slow, it'll be narrow and then it'll build from that."

Among the weakest results were preppy teen retailer Abercrombie & Fitch Co., which reported a massive 32% year-over-year sales decrease; Los Angeles-based American Apparel Inc., whose sales fell 13%; and Limited Brands Inc., down 12%. All three missed Wall Street expectations.

Even mass merchants Costco Wholesale Corp. and Target Corp. reported sales declines of 6% and 6.2%, respectively.

The results are based on sales at stores open at least a year, which are known as same-store sales and considered a barometer of a retailer's health.

Starting with May sales, Wal-Mart Stores Inc. stopped reporting monthly sales and will instead release revenue figures on a quarterly basis. The world's largest retailer said it made the switch to encourage Wall Street to take a longer-term view of the company.

Still, analysts said they were encouraged by strong results from TJX, which reported a 4% sales increase and beat analysts' expectations of a 1.6% drop. At Ross, sales increased 1%, which was better than expectations of a 1.1% decline.

Carol Meyrowitz, chief executive of TJX, said in a statement that the company saw strong increases in store traffic across all divisions last month and was raising its second-quarter earnings forecast.

"The extreme values we offer customers continue to resonate despite the challenging economic environment," Meyrowitz said. "Our strategies of running the business with lean inventories and buying close to need are serving us well."

The potential for good deals prompted Carol Christopher, 50, to stop at a Ross store this week for the first time. She picked out a pair of workout pants for $15 -- a bargain compared with the $60 she used to spend on brand-name athletic pants from a catalog.

"I don't buy anything unless it's on sale, and I find that everything's on sale," said Christopher, a Pasadena resident. "There's absolutely no reason to pay full price for anything. That's my philosophy now."

But not all shoppers are happy with what they're finding in stores.

Struggling retailers have been reluctant to take risks lately, so many are reducing inventory and sticking to selling basics instead of new, unique styles. That's left fewer options for consumers with money to spend.

"The problem with stores right now is they're not carrying as much stuff," said Susan Sipe, 46, who was having trouble finding a dressy top to buy at a Macy's in Pasadena this week. "So it makes it hard to shop. I don't think stores are selling anything that not everyone would want to buy."

More woes could be on the way for retailers if consumers scrimp during the back-to-school season, which kicks off this month. The success of the back-to-school season is often closely correlated with the performance of the holiday season, said Ken Perkins, president of research company Retail Metrics Inc.

"Given the prolonged recession the nation has been in and the pressure the retailers have been under, it's really the only period that could lift retail sales," he said. "But we don't really see it shaping up to be a very positive season. Brands are going to be forsaken for discounts."


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