After weak June, retailers to sweat out summer

By Anne D'innocenzio

Associated Press

Published: Thursday, July 5 2012 2:11 p.m. MDT

A shopper fills her cart at a Target store Thursday, July 5, 2012, in Chicago. Shoppers, worried about jobs and the overall economy, pulled back on spending in June, resulting in tepid sales for many retailers. As merchants reported their sales early Thursday, many of them disappointed. Costco reported a gain below Wall Street expectations, while Target and Macy's also fell short.

M. Spencer Green, Associated Press

NEW YORK — Retailers could be sweating it out this summer.

Shoppers, worried about jobs and the economy, pulled back on spending in June, slowing down sales for many retailers. And that could leave merchants on edge in the coming week, wondering if Americans will spend more once the back-to-school season starts in late July.

"The consumer is in a watch-and-wait mode,'" says Arnold Aronson, managing director of retail strategies at consulting firm Kurt Salmon. "She has to be seduced by value."

The June results, based on revenue at stores opened at least a year, are considered an indicator of a retailer's health. Only a small group of chain stores report monthly sales figures. But the results offer a snapshot of consumer spending, which accounts for 70 percent of all economic activity. The figures have shown an uneven recovery. Discounters and high-end stores, for example, notched stronger growth last month.

But for most, sales were disappointing. Big chains like Costco, Kohl's and Macy's, as well as teen retailer The Wet Seal, were among stores whose results fell short of Wall Street expectations.

Shoppers are concerned about the struggling economy. Employers have pulled back on hiring. Europe faces a recession and growth has slowed in China. Worries about jobs sent shoppers' confidence down in June for the fourth straight month.

Tracy Garza, 41, has been waiting all year for hard evidence that the economy is on solid footing. The San Francisco resident picked up a pair of shoes for $25 at Ross Stores and bought some Blu-ray discs earlier in the year but has held back on buying a laptop for $1,200.

"Are you going to spend? Are you going to wait?" says Garza, whose income from freelance writing and Spanish translation has been uneven. "I'm going to wait to get a better idea of where the economy is going."

Overall, the ICSC tally of 23 chain stores nationwide rose only 0.2 percent, a lower pace than the 1.7 percent increase in May. Excluding drug stores, the index was up 2.6 percent, the low end of the 2.5 to 3.3 percent rise the mall group had predicted. That was a sharp slowdown from a 4 percent gain in May.

June is a period when stores clear out summer merchandise to make room for fall goods. So it is typically the second-biggest shopping month behind December. But because spending was so tepid last month and it took more discounts to get shoppers to buy, March may end up the biggest month, says Mike Niemira, chief economist at the International Council of Shopping Centers.

People spent more during the first three months of the year, when warmer-than-usual weather and a sunnier outlook for the economy lured shoppers to malls. But since then, shoppers, like the economy, have been stalling.

Some temporary factors depressed June's retail results. The figures were compared with a hefty sale gain of 6.9 percent a year earlier, when results were the most robust for that month since 1999. Also, a series of storms left millions without power across a broad swath of the country.

Two trends could help shoppers feel wealthier and give retailers a boost during back-to-school sales, the second-biggest shopping period of the year after the holidays. Gas prices are down 60 cents since their peak of $3.94 in April, and home prices have begun to stabilize in most U.S. markets.

But a big question remains: Will hiring improve? A positive answer would go long way in helping Americans open up their wallets and bolster an economy that relies on consumer spending. On Friday, retailers and shoppers could get a partial answer.

Economists expect U.S. employers to add 90,000 jobs to payrolls when June figures are reported that day. That would be up from 69,000 in May, although the gain wouldn't be enough to lower an unemployment rate stuck at 8.2 percent.

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