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Retailers Report Solid Sales in July

Posted on: Thursday, 3 August 2006, 09:00 CDT

By ANNE D'INNOCENZIO

NEW YORK - Scorching heat in much the country sent consumers in search of summer clothes in July, giving many retailers a solid sales performance for the month. But the outlook for the back-to-school shopping season remained uncertain as higher gasoline prices and rising interest rates are still expected to challenge consumers.

As retailers reported their sales results early Thursday, winners included Costco Wholesale Corp., Limited Brands Inc., Nordstrom Inc. and many companies catering to teens, including Bebe Stores Inc. and Wet Seal Inc.

There were a few stragglers like Pacific Sunwear of California.

"Performance is mixed, but solid. The biggest winners are the teen retailers," said Jharonne Martis, an analyst at Thomson Financial. "The weather helped drive consumers into the malls."

According to Thomson Financial's tally of retailers that had already released their results, 13 retailers beat estimates, one met expectations and 11 missed forecasts.

July, one of the least important months in the retail calendar, is a time when stores are clearing out summer goods to make room for fall merchandise. But the month's solid performance was comforting for retailers who suffered a disappointing June.

Still, worries are high about the resilience of the consumer who's faced with a barrage of concerns from a slowing housing market to war in the Middle East that has driven the price of oil higher. While a solid job market helped lift consumer confidence last month from June levels, a recent batch of reports indicate that the economy is showing the effects of shoppers' financial juggling.

Last week, the Commerce Department said economic growth slowed dramatically during the second quarter, hurt by the housing market and a decline in consumer spending. And while the government reported Monday that personal income grew in June, the increase was not enough to lift the personal savings rate out of negative territory, where it has been for 15 straight months.

Among retailers who announced their sales early Thursday, Costco posted a 7 percent gain in same-store sales, or sales at stores open at least a year. Same-store sales are considered the best indicator of a retailer's health. The results beat the 6.8 percent estimate of analysts surveyed by Thomson Financial.

Nordstrom posted a same-store sales increase of 5.3 percent, exceeding Wall Street forecast of a 4.5 percent gain.

Limited Brands had a 5 percent gain in same-store sales, also beating the 4.5 percent projection.

Teen retailer Bebe had a 10 percent same-store sales gain, well exceeding the 4.0 percent analysts expected.

Wet Seal enjoyed a 6.4 percent gain in same-store sales, above the 2 percent estimate.

Pacific Sunwear, however, suffered a 10.6 percent drop in same-store sales, well below the 1.4 percent Wall Street anticipated.

On Wednesday, American Eagle Outfitters Inc. announced a 7 percent increase in same-store sales, helped by what the company described as a favorable response to its back-to-school assortment and continued momentum of the American Eagle brand.

The results came in below the 8.6 percent estimate from Wall Street. Still, the company raised its second-quarter earnings outlook based on a solid July performance.

Hot Top Inc. said Wednesday that same-store sales dropped 7.2 percent, worse than the 0.7 percent decline analysts projected.

Source: Associated Press/AP Online

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