NEW YORK (AP) — Shoppers, worried about jobs and the overall economy, pulled back on spending in June, resulting in tepid sales for many retailers.
The 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 spending 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 in which 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, said 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. Economists watch the numbers because they offer a snapshot of economic activity.
Overall, the ICSC tally of 23 chain stores nationwide rose only 0.2 percent, worse than the 1.7 percent increase in May. Excluding drugstores, the index was up 2.6 percent, the low end of the 2.5 percent to 3.3 percent increase 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 such as 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.
Economists expect U.S. employers to add 90,000 jobs to payrolls when June figures are reported Friday. That would be up from 69,000 in May. But that still wouldn’t be enough to lower an unemployment rate stuck at 8.2 percent.
In fact, a majority of economists in the latest Associated Press Economy Survey expect the national unemployment rate to remain above 6 percent — the upper limits of what’s considered healthy — for least four more years.
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 figure 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.
“In part, this was a function of a macroeconomic environment that is stagnant at best, and lower spending by tourists in cities such as New York,” said Terry Lundgren, CEO of Macy’s.
Mr. Lundgren also said sales were slowed by the renovation of Macy’s Herald Square store in Manhattan, which is creating more disruptions than expected.
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 in June, more than double what Wall Street expected from the Columbus, Ohio, 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 remains strong in an uncertain economy.
Ross’ revenue at stores opened at least a year rose 7 percent in June, easily beating the 4.8 percent estimate. TJX Cos. also posted a 7 percent increase in June, as more customers visited its stores in search of bargains. The growth was well ahead of Wall Street predictions, and the company boosted its full-year profit prediction.
Luxury chains Nordstrom and Saks Inc., which operates Saks Fifth Avenue, also fared well, easing fears that the affluent could pull back. Nordstrom notched an 8.1 percent increase, and Saks had a 6 percent gain. Analysts had expected a 4.7 percent increase for both retailers.
Please read our comment policy before commenting.