VOL. 127 | NO. 131 | Friday, July 6, 2012
Fred’s, Other Retailers Report Tepid Sales
ANNE D’INNOCENZIO | AP Retail Writer
NEW YORK (AP) – Shoppers, worried about jobs and the overall economy, pulled back on spending in June, resulting in tepid sales for many retailers, including Memphis-based Fred’s Inc.
Memphis-based Fred’s Inc. and other national retailers reported slow sales in June, causing concern just ahead of back-to-school shopping. (Daily News File Photo: Lance Murphey)
The discount store operator said Thursday that revenue at stores open at least a year fell by 4 percent in June. Analysts on average expected same-store sale to rise by 0.2 percent, according to Thomson Reuters. The metric is a key gauge of a retailer’s health because it strips out the impact of newly opened and closed stores.
The national retail results raise concerns about Americans’ ability to spend during the back-to-school season, which is the second-biggest shopping period of the year and starts later this month.
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. However, wealthy shoppers continued to splurge on status goods despite the weakening stock market. That boosted results at Saks and Nordstrom.
“These are disappointing results,” said Ken Perkins, president of RetailMetrics, a research firm. “The consumer is slowing down and becoming increasingly more cautious as the economic backdrop is deteriorating. This doesn’t set up particularly well for back-to-school.”
People spent more earlier in the year, when warmer-than-usual weather and a sunnier outlook for the economy lured shoppers to load up on spring clothing. But consumers have grown more cautious since then. June, a period when stores clear out summer merchandise to make room for fall goods, is typically the second-biggest shopping month behind December. But that honor may go to March, because spending was so tepid last month and it took more discounts to get shoppers to buy, says Mike Niemira, chief economist at the International Council of Shopping Centers.
Only a handful of chains representing roughly 13 percent of the U.S. retail industry report monthly sales. Those figures are based on stores open at least a year and are a key measure of retailers’ health because they exclude newly opened and closed stores.
Overall, the ICSC tally of 23 chains rose only 0.2 percent, worse 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.
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 last month left millions without power across a broad swath of the country.
But clearly people were concerned about news of a struggling global economy. U.S. manufacturing shrank in June for the first time in nearly three years, and employers pulled back on hiring. Europe faced a recession and growth slowed in big countries like China. Worries about jobs sent shoppers’ confidence down in June for the fourth straight month.
Some positives have emerged. Gas prices are down 60 cents since their peak of $3.94 in April, and data show that home prices have begun to stabilize in most U.S. markets. But in order for shoppers to get more comfortable spending, hiring needs to improve dramatically.
June’s results were lopsided, with discounters and luxury stores faring better than mall-based clothing merchants catering to low to middle-income shoppers.
Costco’s revenue from stores open at least a year rose 3 percent but fell short of Wall Street’s expectations. Analysts polled by Thomson Reuters expected, on average, a rise of 3.7 percent from the Issaquah, Wash., wholesale club operator.
Target’s revenue in stores open at least one year rose 2.1 percent as shoppers spent more on food and health and beauty items. That was slightly lower than the 2.4 percent rise analysts expected.
Macy’s reported a slimmer 1.2 percent gain, below the 1.9 percent increase that analysts had projected.
Among teen retailers, The Wet Seal said that revenue in stores open at least one year fell 9 percent, a bigger drop than analysts expected. Analysts polled by Thomson Reuters expected a 7.7 percent drop.
Among the bright spots was Limited Brands, which sells affordable luxuries. It enjoyed a 7 percent gain, more than double what Wall Street expected from the Columbus, Ohio-based company. Limited Brands operates Victoria’s Secret and Bath & Body Works stores in North America.
Strong performances at Ross Stores and The TJX Cos., which operates Marshalls, T.J. Maxx and Home Goods, showed that shoppers’ appetite for brand names at bargain prices remain strong in an uncertain economy.
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