Sales soared in July at big chains Numbers reflect consumer confidence that future is rosy

Yearlong spending spree

Lower cost of Asian imports was boon to U.S.


August 07, 1998|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Consumers braved the heat and headed for the stores in droves in July, as confidence in the economy sent retail sales soaring above expectations.

Continuing a spending spree that began about a year ago, consumers eagerly bought everything from major appliances to apparel to home furnishings, major retailers reported yesterday.

In a climate of high employment, low inflation and strong consumer confidence, the year is shaping up after seven months as one of the best ever for retailers, analysts said.

"Consumer confidence has been surging," said Howard

Davidowitz, chairman of Davidowitz & Associates Inc., a national retail consulting firm in New York.

"People walk around with a balance sheet in their head," Davidowitz said. "They do know their job is secure, their 401(k) plan is up because of the market. They know their company is doing better, and they're getting a bonus, and the home they own is worth more. That encourages people to spend."

The nation's largest retailers reported sales increases that averaged 5.5 percent over the same period a year ago, according to the Bloomberg Composite Same-Store Sales Index, with sales at mass discounters up as much as 7 percent.

"There's no sign the spending spree is abating," said Kurt Barnard, president of Barnard's Retail Trend Report in Upper Montclair, N.J. "You have to remember, up until a couple days ago, the stock market was felt to be a sure thing, going in one direction only -- up."

The Asian economic crisis has helped retail sales in the United States, he said. Many retailers import as much as a third of their goods, and the lower cost of Asian imports has enabled retailers to maintain or even boost gross margins without raising prices.

"This year is really shaping up; the first half of the year was better than most people had expected it to be," said Joseph Ronning, a retail analyst with Brown Brothers Harriman in New York. The strong first half has left retailers with more balanced levels of inventory, meaning they do not have to resort to price-slashing.

The discounters, such as Wal-Mart Stores Inc., Kmart Corp., Dollar General and Dayton Hudson Corp., with its successful Target division, continued to fare especially well. They posted increases ranging from 5.2 percent to 7.1 percent, proving that Americans are as value-conscious as ever, analysts said.

Gap Inc., led by sales at its lower-priced Old Navy division, posted a sales gain of 19 percent, signaling that the newer division has caught on with the booming teen-age market.

"Americans today feel the choice is so enormous that they don't have to go broke to buy anything," Barnard said. "Americans are willing to spend, but they insist on good quality, lots of assortment, good fashion and a reasonable price. That is what drives business today. Companies that fall short don't do well."

Some that have suffered by failing to meet those demands include J. C. Penney Co. Inc., which posted a 5.7 percent drop in sales for the month, and Sears, Roebuck and Co., where sales rose 1.7 percent.

But Sears, which experienced weakness in its apparel sales, reported double-digit increases in sales of washers, dryers and vacuum cleaners.

Other retailers in the midst of turnarounds reported strong numbers, but they were increases from dismal figures for July a year ago. Ann Taylor Stores, for instance, posted a 23.2 percent increase, and Limited Inc. reported a 7 percent rise.

Analysts said it could take two to three months to learn whether those figures reflect a turnaround.

Retail sales

.................. ......... Monthly ............ YTD

.................. Monthly. same-store YTD same-store

Company .......... sales* pct. change sales* pct. change

Circuit City ..... $830.4 ... 9.0 .... n/a ....... n/a

Dayton Hudson ... $2,056. ... 5.2 .. $13,090 ..... 5.2

The Gap ........... $572 ... 19.0 ... $3,625 ...... 18

J.C. Penney ...... $1.943 .. -5.7 .. $13,312 .... -0.2

Kmart ........... $2,358. ... 5.9 .. $15,631 ..... 5.2

Kohl's Corp. ..... $221.6 .. 10.4 ... $1,503 .... 11.7

The Limited ...... $582.6 ... 7.0 ... $4,091 ....... 7

Lowe's ........... $947.7 ... 2.3 ..... n/a ...... n/a

May Dept. Stores.. $788.3 ... 4.8 ... $5,550 ..... 4.4

Sears ........... $2,220. ... 1.7 .. $19,270 ..... 3.3

Wal-Mart ........ $9,727. ... 7.2 .. $63,877 ..... 9.4

* In millions

Pub Date: 8/07/98

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