Retailers report solid sales gains for July

NEW YORK — Many retailers posted solid sales during the kickoff to the back-to-school season as deep discounts and sweltering heat in July drove shoppers to air conditioned malls. But merchants worry that momentum won't continue throughout the remainder of the second-biggest shopping period of the year.

Despite a flow of bad economic news that kept consumer confidence shaky, a wide range of retailers that reported July sales on Thursday delivered results that beat Wall Street estimates, including discounter Target, department store Macy's. and luxury chain Saks. The International Council of Shopping Centers' preliminary tally of retailers' sales at stores open at least a year — a key indicator of a merchant's health — was up 4.6 percent, a slower pace than June's 6.9 percent gain but in line with forecasts.

While the numbers signal a strong start to the back-to-school shopping period, roughly between mid-July through September, there are concerns that shoppers will soon return to their habits of the Great Recession by focusing on necessities and waiting for ever bigger discounts. That could be a big problem for retailers, which are raising prices in order to offset with rising fuel, labor and other production costs.

"Early going, July looks like it's shaping up to be a solid month despite all the economic headwinds," said Ken Perkins, president of RetailMetrics LLC., a research firm. "But the concern is whether shoppers will buy back-to-school items at full price."

The concern stems from the fact that while the recession officially ended in June 2009, many shoppers, particularly in the low-to-middle income bracket, feel like it never ended. After all, the economic picture for most has not improved.

For many, wage gains haven't kept pace with higher household costs for food and gas, which is $1 more per gallon than a year ago. Home values remain depressed, and now companies, worried about the economy, are pulling back on hiring. Adding to that, this fall, shoppers will face higher price tags as retailers try to offset higher labor costs in China and prices of raw materials.

In this environment, retailers that cater to higher-income shoppers have fared the best. The biggest standouts have been luxury retailers like Saks Inc., which had a 15.6 percent increase for the month. That was much higher than the 8.5 percent forecast