Retail sales up 2.6% in July

Modest increase affected by heat, low inventories, price-conscious shopping

August 09, 2002|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

Retailers posted modest sales growth last month as price-conscious consumers helped discounters, drugstores and furniture stores to gains for the month despite hot weather and fewer goods available for traditional July sales.

Sales last month rose 2.6 percent after rising nearly twice as much in June, according to a Bank of Tokyo-Mitsubishi survey of 81 chain stores released yesterday.

"Sales were strong in June, and there was less summer merchandise left over to clear in July," said Michael P. Niemira, an economist at the bank.

Stores selling essential items were among the winners, but some analysts said consumers are beginning to hold off buying big-ticket or discretionary merchandise.

One indicator, analysts said, was yesterday's announcement from Best Buy Co. slashing its second-quarter earnings outlook a second time, this time to 17 cents-21 cents from 30 cents-32 cents.

"It's taking longer for people to throw down the money," said Marie Driscoll, a retail analyst with Argus Research in New York.

But July is such a soft sales month that retailers will have to compile August numbers before they can begin discerning trends among consumers.

Mass discounter Wal-Mart Stores Inc. posted a 4.5 percent increase in same-store sales last month.

Target Corp. reported a 1 percent increase for its stores, which include Target, Mervyn's and Marshall Field's.

"Even in bad times, we think Wal-Mart wins," said Joseph Correnti, research director for Wayne Hummer Investments in Chicago. Correnti said sales last month were "pretty good" for Wal-Mart and other retailers, considering that last year at this time "people had the tax rebate in their hands."

Sales at Wal-Mart's wholesale division, Sam's Club, and at other similar wholesale clubs, slowed as consumers spent less money on discretionary items and bulk-food purchases.

BJ's Wholesale Club's same-store sales were up 1.5 percent last month, leading the chain to lower its second-quarter earnings outlook to 50 cents from 52 cents-54 cents.

Club store sales are typically driven by bulk-food items or other big-ticket items that consumers don't necessarily need, said Lori Wilking, a retail analyst with H&R Block Financial Advisors in Detroit. But people have been "kind of pulling back from the big-ticket items," she said.

Fewer clearance sales meant that many retailers were still able to protect their profit margins in July because of strong sales in June, Wilking said.

Sales at many major department stores continued to decline. Sales last month at May Department Stores Co., which operates Lord & Taylor and Hecht's, were 6.2 percent lower than in the corresponding period last year.

Sears, Roebuck & Co. reported a 4.9 percent drop, and Federated Department Stores Inc., which operates Macy's and Bloomingdale's, had a 5.2 percent drop. J.C. Penney Co. Inc.'s department stores slid 2.2 percent.

Sales at some major apparel chains, a sector that hasn't performed well over the past year, showed signs of life. AnnTaylor Stores Corp. posted a 7.4 percent jump in same-store sales, attributing its gains to successful end-of-season clearance sales.

Ken Goldstein, an economist at the Conference Board, a New York-based business research group, said that signs point to an economic recovery gaining momentum by the end of the year that will be helped by consumer spending.

"People are concerned; they're paying attention, but people aren't panicking," he said. "You go out into the malls and look at those back-to-school sales. It doesn't look like the day after Thanksgiving, but they're not empty."

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