Retailers report tepid comparable sales for July

NEW YORK - Deep discounts on summer leftovers and hot weather drove shoppers into malls in July, but they remained choosy, resulting in only modest gains.

The sluggish spending raises worries about the health of the back-to-school season as Americans step up saving amid a stalling economic recovery. Already, such retailers as teen specialists Abercrombie & Fitch Co. and American Eagle Outfitters Inc. are offering generous discounts on new jeans to lure shoppers in the heat wave that hasn't let up since June.

As stores reported their results today, there were some clear winners. Costco Wholesale Corp. and Victoria's Secret parent Limited Brands Inc. had robust gains. Macy's Inc. posted a strong increase, and the CEO said that the back-to-school business was off to a "great" start, helped by its newly launched Material Girl fashion collection created by pop star Madonna and her 13-year-old daughter, Lourdes.

Still, those figures are being compared with dismal spending in July 2009. And a majority of the stores reporting results came in below Wall Street projections, according to Thomson Reuters.

In the Philadelphia area, most retailers that reported in the last week announced a decrease in same-store sales. Only the privately run Burlington Coat Factory reported increased sales, and that was for the quarter as well as the half.

In the nation overall, teen clothing stores were among the hardest hit, with the Buckle Inc. and the Wet Seal Inc. suffering declines.

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

"Consumers are being pressured," said Karen Ghaffari, managing director at Fitch Ratings." We're in a recovery, but we're in a muted recovery."

Ken Perkins, president of research firm RetailMetrics, predicts stores are "going to have to be very promotional all the way through." He added that consumers, particularly in the low- to middle-income brackets, are in a "buy now, wear now" mode because they don't have a lot of discretionary income.

The International Council of Shopping Centers, based on a tally of 31 retailers, posted a 2.8 percent increase in July, below the 3 percent to 4 percent pace that was expected. That compares with a 5 percent drop a year ago.

July marks the fourth straight month of weak spending after retailers got a surprise bounce earlier in the year amid a rising stock market and government incentives. But confidence is falling as worries grow that the economic recovery is stalling. An unemployment rate that's still stuck at almost 10 percent and tight credit are making shoppers focus on saving more and being picky about what they buy.

A report from the Labor Department released today shows that initial requests for jobless benefits rose last week to their highest level since April, a sign that hiring remains tepid and some companies are still cutting workers.

July marks the end of most retailers' fiscal second quarter. But it's the least important month in the quarter because stores use it to clear out summer leftovers and bring in fresh fall merchandise. This year, stores had to discount more than they had planned in June and July on summer items to pull in recession-scarred shoppers.

It's still too early to get a read on back-to-school spending as goods started hitting the floors in the past two weeks. But the big discounts on jeans underscore how tough a battle it will be to grab business from rivals.

Aeropostale Inc. just started marking down all new jeans by 50 percent. They're 40 percent off at Abercrombie & Fitch Co.

Target Corp. reported that an increase in customers and higher food sales helped July revenue in stores open at least one year rise 2 percent in July. Strong food, household and beauty product sales were offset by weak electronics, video games, music and move sales.

Wal-Mart Stores Inc., the world's largest retailer, no longer reports monthly figures.

Costco's 6 percent gain was driven by fuel sales and international revenue.

Among department stores, Macy's posted a better-than-expected 7.3 percent increase. But Penney had a 0.6 percent decline, below the 3.4 percent gain projected by Wall Street. J.C. Penney said that men's clothing and women's accessories were top performers, as were sales of summer apparel and accessories across most categories.

July's strength, however, was offset by Penney's selling through its clearance inventory at a faster rate, and often at sharper discounts than in the year-ago period, the retailer said. This resulted in lower total clearance sales when compared to last year, but enabled the chain to enter the back-to-school season with fresh inventory.

Limited, operator of Victoria's Secret and Bath and Body Works, reported a 12 percent gain, more than double what analysts expected. The company raised second-quarter net income guidance.

But teen clothing chains, hit hard by high unemployment among 16- to 19 year-olds, were among the weakest performers.

American Eagle reported flat results, slightly better than the 0.2 percent decline analysts had predicted. Abercrombie & Fitch had a 7 percent increase, beating the 4.1 percent estimate, but still far from making up for a 28 percent drop a year ago.

The Philadelphia-based maternity retailer said same-store sales were down 0.3 percent using retail fiscal calendar reporting (with the month starting on a Sunday), and were down about 2.6 percent after adjusting for reporting on an actual calendar month basis.

"Our July sales results were somewhat weaker than originally planned, but improved in the latter half of the month and ended the month near the high end of our recent guidance," said Ed Krell, chief executive officer. He noted that the company had offered a guidance range of comparable-store sales of flat to a decrease of 2 percent.

He said that business expansion plans include leased space in more Macy's stores, from the current 113 to more than 615, as well as a relaunching of a business agreement with Sears, with locations entering more Sears and Kmart stores.

In the United States and Canada, As of July 31, the company runs 1,678 retail locations in the United States and Canada under the names Motherhood Maternity, A Pea in the Pod and Destination Maternity, and has operations and licensing agreements with other chains and in India and the Middle East.

Shares were down 65 cents (2.19 percent) to $29.07 in early-afternoon Nasdaq trading.

The York, Pa.-based department store operator said that revenue in its stores open at least a year fell 0.3 percent in July, hurt by heavy rains and hot weather.

Best-selling items included ladies' shoes, sportswear for men and women, jewelry and intimate apparel. The weakest-performing categories were children's, juniors, home products and men's.

Vice Chairman and merchandising president Tony Buccina said the month finished strong.

The chain's full second-quarter results will be released Aug. 19.

Bon-Ton operates 278 stores in the Northeast, Midwest and upper Great Plains under the brand names Bon-Ton, Bergner's, Boston Store, Carson Pirie Scott, Elder-Beerman, Herberger's, Younkers and Parisian.

Company shares were down 5.54 percent (54 cents) to $9.20 in early afternoon trading.

Burlington Coat Factory Warehouse Corp. said today that comparable store sales increased 0.3 percent for the second quarter, and were up 1.9% for the six-month period. Both of those reporting periods ended July 1.

The Burlington, N.J.-based company, which was taken private by Bain Capital Partners L.L.C. but files with the Securities and Exchange Commission, also said that net sales for the second quarter, ended July 31, were $728.8 million, 4 percent more than the $701 reported for the comparative period ended August 1, 2009.

Net sales from continuing operations for the six months ended July 31 were $1.62 billion, 6 percent more than the $1.53 billion for the comparable period.

"We are pleased to report our second consecutive quarter with a positive comparable store sales performance which contributed to a total sales increase of 6 percent for the spring season," said Tom Kingsbury, chief executive.

As of July 31, the company runs 447 stores in 44 states and Puerto Rico, mainly under the name Burlington Coat Factory.

The Camp Hill, Pa.-based drugstore chain said last week that same-store sales fell 1.1 percent for the four-week period ended July 24.

The company also said that its overall revenue fell in July as it continued to close stores.

Total revenue for the four weeks ended July 24 decreased 2.2 percent to $1.89 billion from $1.93 billion.

At stores open at least one year, pharmacy revenue fell 1.4 percent and "front end" revenue of nonpharmacy items, such as food and cosmetics, dipped 0.5 percent. Prescriptions filled at those stores fell 1.5 percent.

A year ago, the swine flu epidemic boosted revenue of flu shots and related treatments and products. This year's flu season has been far milder.

Rite Aid ran 4,751 stores as of July 24. That is 66 less than a year ago.

In morning trading, Rite Aid shares rose a penny to 96 cents.

Earlier this week, the company said it had been warned by the New York Stock Exchange that it risks being delisted for not have its average share price at the minimum $1 over a 30-day period. The company's board approved a reverse split to buoy the price.

Discounters

BJ's Wholesale Club Inc. 2.8 pct (including gas)

Costco Wholesale Corp. 6 pct (including gas)

Fred's Inc. 2.7 pct

Target Corp. 2 pct

Drugstores

Rite Aid Corp. -1.1 pct

Walgreen Co. 0.4 pct

Department stores

Bon-Ton Stores Inc. -0.3 pct

Dillard's Inc. -3 pct

J.C. Penney Co. -0.6 pct

Kohl's Corp. 4.1 pct

Neiman Marcus Group Inc. 12.3 pct

Nordstrom Inc. 7.6 pct

Macy's Inc. 7.3 pct

Saks Inc. 6.4 pct

Stage Stores Inc. -0.6 pct

Clothing stores

Abercrombie & Fitch Co. 7 pct

Aeropostale Inc. 1 pct

American Eagle Outfitters Inc. no change

The Buckle Inc. -9.3 pct

Cato Corp. 2 pct

Gap Inc. 1 pct

Hot Topic Inc. -9 pct

Limited Brands Inc. 12 pct

Ross Stores Inc. 2 pct

Stein Mart Inc. -2.6 pct

TJX Cos. 2 pct

Wet Seal Inc. -4.3 pct

Zumiez Inc. 9.4 pct