July's heat warms sales

Cooling products help stores to 7% rise as buying binge rolls on

August 06, 1999|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

July's heat sent American consumers into the stores in search of lightweight apparel, fans and air conditioners, allowing the nation's biggest chain retailers to beat analysts' projections for sales.

Sales for the month rose on average nearly 7 percent, as consumers continued a seven-month buying binge fueled by confidence in the economy.

"July turned out to be a surprisingly strong month," said Kurt Barnard, president of Barnard's Retail Trend Report, a New Jersey-based consulting firm. "For many companies, it exceeded expectations. July is usually a dull month given over to clearance."

Less merchandise was left to be cleared because sales had been so strong in May and June and because many retailers could not have anticipated the record heat that increased demand for summer items, analysts said.

Though some retailers were hurt by having lean summer inventory, others benefited from the increase in sales of goods with higher price tags, such as air conditioners and fans.

At Sears, Roebuck and Co., for instance, air conditioners helped propel sales of electronics into double-digit gains, though the department store reported a meager increase of 0.9 percent.

According to a tally of 82 chain stores by Bank of Tokyo-Mitsubishi Ltd., sales rose 6.9 percent, compared with the same month a year ago. The tally showed sales rising an average 5.6 percent at apparel chain stores, 2.9 percent at department stores, 7.6 percent at discount stores and 15.5 percent at electronics stores.

Much of the month's average sales increase was driven by Wal-Mart Stores Inc., where a 9.9 percent sales increase beat projections of 7.5 percent, said Michael P. Niemira, a vice president with Bank of Tokyo-Mitsubishi.

The month's numbers reflect that low inflation and income growth are still propelling spending, he said.

"Consumers have been on a spending spree," said Barnard. "They've shrugged off the interest rate increases as they will shrug off any future interest rate increases. They want a part of the good life, and they feel confident enough to go and buy it."

Still, the rate of increase slowed from June, when average sales rose 7.4 percent, compared with June 1998. The percentage of retailers in the 82-store tally that posted a decline in sales grew to more than 18 percent in July, compared with 10.5 percent in June.

Those trends are likely to continue for the rest of the year, Niemira predicted, based on a recent slowdown in weekly earnings growth and in nonauto sales.

"There are indications that suggest maybe the environment will be different six months from now," Niemira said.

Besides Wal-Mart, retailers who turned in some of the best performances in July include discounters such as Costco Companies Inc., which reported an 11 percent gain, and Dollar General Corp., with a 10.7 percent increase, and specialty stores Talbots Inc., with a 14.4 percent increase, and American Eagle Outfitters, with a 13.5 percent increase.

Most department stores showed only small sales gains, with Federated Department Stores Inc., which owns Macy's and Bloomingdale's, reporting sales up 4.7 percent; J. C. Penney Co. showing sales up 4.1 percent; and May Department Stores Co., owner of Hecht's and Lord & Taylor, up 1.9 percent.

Among the weaker performers were Gap Inc., where sales rose 2 percent, and Nieman Marcus Group Inc., where sales fell 1.3 percent.

The Gap is suffering because its hugely successful Old Navy division is diluting sales company-wide, Barnard said. The company also has been hurt by competitors copying its khakis-and-T-shirt style.

"On top of that, there's some beautifully presented specialty stores that are drawing young people away from The Gap, such as Abercrombie & Fitch, Pacific Sunwear, American Eagle Outfitters," Barnard said. "Then there are a lot of department stores now carrying Gap-type [merchandise] and Gap-type departments."

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