Retailers report disappointing July sales

Higher gas prices, a weakening housing market and other financial concerns left many shoppers tightening their purse strings in July, making for a disappointing start to the back-to-school shopping season.

With many merchants reporting sluggish monthly sales results Thursday, the weakest performers were mall-based apparel chains, particularly teen merchants like Pacific Sunwear of California Inc. and Wet Seal Inc. Some experts suspected that high gas prices may have been a factor in keeping people out of the malls during the month.

Wal-Mart Stores Inc. posted a slim gain for the four-week period. The company also warned that its efforts to offer deeper discounts on thousands of items, while appealing to customers, is hurting profit margins.

Among the few standouts were J.C. Penney Co. and Costco Wholesale Corp., both of which beat expectations.

“Overall, July sales were negatively impacted by soft mall traffic,” said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass. “The consumer is holding up, but certainly feeling the pinch of the housing market and higher gasoline price.”

According to the International Council of Shopping Centers-UBS preliminary tally of 48 stores, July results were up 2.6 percent, compared to the 3.9 percent gain in the year-ago period. The tally is based on same-store sales or sales at stores opened at least year, which are considered a key barometer of a retailer’s health.

July’s results extended the slowing sales trend retailers have experienced since February as consumers are forced to pay more for food and gas. The slumping housing market and a widening credit crunch, both of which have made the stock market turbulent, are also making consumers shy about spending.

The July results were in line with the modest 2.3 percent same-store sales pace so far this fiscal year, which starts in Febuary, but is well below the 3.9 percent average in the year-ago period, according to Mike Niemira, chief economist at ICSC.

Still, the picture this month was made more complicated because of some quirks in the retail calendar. Sales for the first week of August, a key back-to-school week, were reported in this year’s July period, which did help July figures but should reduce business for August. And results were depressed by a shift in a tax free sales week to August in two critical states, Florida and Texas, which analysts say helped delay shopping.

Analysts also point out that a growing number of schools are starting classes later, delaying back-to-school purchasing. Teens usually wait to do the bulk of their shopping until they see what their friends are wearing.

The weak sales reports do not bode well for retailers’ quarterly, which are slated to be announced starting next week. According to Perkins, second-quarter earnings growth should be up a modest 2.5 percent, racheted down from 7.0 percent in early May amid increased discounting and sluggish sales. On Thursday, Talbots Inc. was among several stores that cut earnings forecasts.

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