NEW YORK (AP) — The sluggish sales that have dogged the nation’s retailers this year are the result of two sets of problems: Consumers are cautious because they are paying more for gasoline and watching their home values fall, and the stores just don’t seem to have the merchandise people want to buy.
As retailers reported generally disappointing July sales results yesterday, it was clear that the weakening housing market and more expensive gas had shoppers limiting their trips to the mall and, when they did go, buying tentatively, following a pattern that began in February.
Analysts say stores can’t blame all their problems on macroeconomic conditions. Even teen retailers like Pacific Sunwear of California Inc. and Wet Seal Inc., which tend to be least vulnerable to the whims of the economy, had a bad month. That suggests to analysts that stores are not serving up the most exciting products.
“There is a big middle that is treading water, trying to figure out what their consumers are looking for,” said Trish Walker, partner in the retail practice at the consulting firm Accenture.
Meanwhile, sales of electronics like flat-screen televisions aren’t suffering.
According to the International Council of Shopping Centers-UBS preliminary tally of 48 stores, July results were up 2.6 percent, compared with 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.
The July results were in line with the modest 2.3 percent same-store sales pace so far this fiscal year, which started in February, but is well below the 3.9 percent average in the year-ago period.
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 helped boost July figures but should reduce business for August.
Results also 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.
Stores are also blaming another trend: A growing number of schools are starting classes later, delaying back-to-school purchasing. Teens usually wait to do some of their shopping until they see what their friends are wearing.
John Morris, managing director of Wachovia Securities, argued, however, that if there was a clear hot fashion trend, “teens wouldn’t need to wait.”
The weak sales reports do not bode well for retailers’ second-quarter profits, which are scheduled to be announced starting next week. Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass., said second-quarter earnings growth should be up a modest 2.5 percent, reduced from 7.0 percent in early May amid increased discounting and sluggish sales. Yesterday, Talbots Inc. was among several stores that cut earnings forecasts.
Wal-Mart Stores Inc. also said its profit margins were being squeezed because of heavy discounting. The world’s largest retailer posted a 1.9 percent same-store sales gain, beating the 1.5 percent estimate of analysts surveyed by Thomson Financial. The discounter said it was encouraged by positive early signs in back-to-school categories, but acknowledged that apparel and home furnishings were again weak and are expected to remain so through the third quarter.
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