Tags: consumers | retail sales

Consumer Discount Buying Drags on Retailer Sales

Thursday, 08 July 2010 08:33 AM

Americans focused on deeply discounted clothing that they needed in June amid escalating worries about jobs, resulting in sluggish sales for many retailers, according to early reports.

June's lackluster performance is raising concerns about the back-to-school shopping season and the health of the overall economic recovery.

As merchants reported their results Thursday, Costco Wholesale Corp. posted a solid revenue gain, but it was fueled by its international business. Many teen merchants including The Buckle Inc., Hot Topic Inc. and The Wet Seal Inc. reported decreases in revenue.

Limited Brands Inc., which owns Victoria's Secret and Bath & Body Works, is among the bright spots.

The figures are based on revenue at stores open at least a year and are a key indicator of retailers' health.

"My sense is that the consumer is very cautious at this stage given the state of the labor market, the housing market," said Ken Perkins, president of research firm RetailMetrics. "June sales are going to reflect that caution." A sluggish June sets up a "disappointing back-to-school season," he said. "I think (back-to-school) is going to be very promotional."

June is a time when stores clear out summer goods to make room for back-to-school merchandise. But analysts say discounting was heavier than expected as stores had to work hard to pull in shoppers continuing to grapple with a deluge of financial issues.

Clothing stores accelerated discounting toward the end of June after not getting enough business, BMO Capital Markets analyst John Morris said. He estimated that volume and level of discounts at the mall-based apparel chains he tracks was even with a year ago even as stores carry less inventory than a year ago. Discounting was down 5 percent in May from a year earlier, after being down 10 percent from February through April, Morris said.

Uncertainty is growing as evidence mounts -- from disappointing housing data to sluggish hiring -- that the recovery is stalling heading into the second half of 2010. And that is when the benefits of most of the government's stimulus spending will begin to fade.

Consumers also saw their retirement funds erode further as the Dow Jones Industrial Average has declined 13 percent from its late April peak.

Such economic worries drove down consumer confidence by 10 points in June, reversing three straight gains, according to private research group The Conference Board.

Costco said Thursday that revenue in stores open at least one year rose 4 percent in June, boosted by international results. Analysts surveyed by Thomson Reuters, on average, expected a 4.2 percent gain.

U.S. revenue in stores open at least one year rose 2 percent in the U.S. and 14 percent internationally.

Limited Brands, which operates Victoria's Secret and Bath and Body Works, said it posted a 6 percent gain in June, better than the 3.2 percent growth forecast.

Wet Seal had a 3.6 percent drop in June, and the teen clothing seller said it now expects second-quarter results at the low end of its previous guidance. Analysts had expected a smaller 1.8 percent drop.

The Buckle suffered a 7.3 percent drop in June, much worse than the slight rise analysts expected.

Hot Topic Inc. posted a 2.1 percent decline in June, though that was better than the 5.4 percent drop analysts had expected.

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Americans focused on deeply discounted clothing that they needed in June amidescalating worries about jobs, resulting in sluggish sales for many retailers,according to early reports.June's lackluster performance is raising concerns about the back-to-schoolshopping season...
consumers,retail sales
Thursday, 08 July 2010 08:33 AM
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