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Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission.Retailers endured another tough month in July -- the worst since January -- as weaker consumer spending signaled a tough time for back-to-school sales, the second-biggest retail season after Christmas.
Sales at stores open more than a year, a key indicator of retail health, fell 5.1%, according to a survey of 30 major retailers by Thomson Reuters Inc. The result doesn't include sales at industry giant Wal-Mart Stores Inc., which recently stopped releasing monthly figures.
The dismal results are partly a reflection of buyers retrenching as unemployment rises, said retail experts. Many economists expect July's unemployment rate, due to be disclosed Friday, will hit 9.8%, up from 5.7% a year ago.
"A large chunk of the American population has decided not to do any discretionary spending. They're going to the grocery stores and doing very little else," said Stephen J. Hoch, a professor of marketing at the University of Pennsylvania's Wharton School of Business.
In an ominous sign for back-to-school spending, teen retailers were hit the hardest. Sales for that group fell 12.1%, according to Thomson Reuters. Among the outlets struggling were Abercrombie & Fitch Co., the pricey teen chain, which reported same-store sales fell a whopping 28%, and Gap Inc., which posted an 8% drop.
Even Aeropostale Inc. and Buckle Inc., two youth-oriented clothing chains that have outperformed their peers this year, posted weaker gains in July than previous months. Aeropostale reported a 6% same-store sales increase, compared to a string of mostly double-digit monthly gains. Buckle, of Kearney, Neb., came in with just a 2.8% increase, after 22 months of double-digit gains.
Department stores, office-supply stores and clothing stores depend heavily on the back-to-school period, which begins in July and runs through September. Results last month were hampered in part as states, including California, Texas and Florida, postponed their annual tax-free shopping days for school goods to August from July.
Weak back-to-school revenue could influence what customers see on shelves in the fall and winter, as retailers further cut inventories due to poor demand. "Based on July data we would anticipate a rocky next few months for retailer performance," said Bryan Gildenberg, chief knowledge officer at retail consultants Management Ventures Inc. ShopperTrak RCT Corp., which measures traffic at shopping malls, on Thursday forecast a 5.9% decline in sales for August, the prime month for school-related purchases.
Department stores also struggled last month. J.C. Penney Co. and Target Corp., which are aggressively marketing back-to-school clothing and dorm furnishings, posted 12.3% and 6.5% declines, respectively. Macy's Inc. said its sales dropped 10.7%.
Shannon Albright, a Braintree, Mass., real-estate agent and mother of two school-aged children, said she has postponed back-to-school shopping until "later this month and maybe even September" as declining home sales pinch her income. Ms. Albright said she took the family on a short vacation in July. "It was either go on vacation or shop for back to school -- I can't do both," she said.
High school and college students have had difficulty finding summer jobs this year, further crimping spending. "If you are a teenager and have a limited budget, are you going to buy the first hot fashion item now when you're hanging out at home or are you going to save your money for when you go back to school and all your friends are going to see you?" said Doug Conn, a managing director at Hexagon Securities, an investment-banking and securities firm.
Luxury retailers are also still struggling to attract shoppers. Same-store sales at Saks Inc. slid 16.3% while Nordstrom Inc. posted a 6.9% decline. "The high-end retailers still have their core customers, but the aspiring shopper has pulled back," said Mr. Conn.
One retailer benefiting from tough economic times is TJX Cos., the parent of T.J. Maxx, Marshalls and other chains. The Framingham, Mass., company, which sells discounted brand-name merchandise, is picking up customers that in previous times frequented department stores. The company's same-store sales rose 4%, beating analysts' consensus expectations of a 2.3% rise.
Warehouse clubs reported declines, partly because of the fall in gasoline prices. Last summer, when gas cost about $4 a gallon, motorists flocked to the clubs to take advantage of their cut-rate fuel, but with prices down to about $2.50 a gallon, that traffic has tailed off.
Costco Wholesale Corp., of Issaquah, Wash., saw a steeper-than-expected 7% decline in same-store sales, while rival BJ's Wholesale Club Inc. reported a 9.1% drop. Excluding gasoline sales, Costco's sales slipped 1% and sales at BJ's climbed 1.8%.
Looking forward, some analysts fear the government's "cash for clunkers" rebate program, which is driving buyers to auto dealers with up to $4,500 trade-in allowances on new-car purchases, may siphon retail dollars.
Richard Feinberg, a professor of retail management at Purdue University, estimates spending on new-car loans could reduce money available for retail sales by $1.5 billion through December, assuming the program reached $3 billion. "That is money that won't be spent in stores and restaurants and the places that drive our economy," he said.
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Simmi Aujla and Ann Zimmerman contributed to this article.
Credit: By Joseph Pereira
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