Chris Hondros  /  Getty Images
Consumers kept their wallets in their pockets for the second straight month. Mall-based retailers such as The Gap reported slow sales for July.
updated 8/5/2004 12:50:30 PM ET 2004-08-05T16:50:30

Consumers’ frugal spending extended into a second month during July, giving many retailers lackluster sales gains, particularly at mall-based apparel chains like Gap Inc.

Analysts attributed the disappointing sales to a variety of factors, including the end of the mortgage refinancing boom and the continuing impact of higher gasoline prices. They said retailers should expect more of this downbeat trend going forward.

“I think it will be tough to sustain the increases,” from the first half of the year, said Jay McIntosh, director of Ernnst & Young’s retail and consumer products industry group. He also cited consumers’ lingering concerns about job security.

Analysts also said apparel chains were hurt by cooler than usual weather in the beginning of July.

The preliminary International Council of Shopping Centers-UBS sales tally of 54 retailers was up 3.5 percent, in line with forecasts. The tally is based on what the industry calls same-store sales, or sales at store opened at least a year. Those sales are considered the best indicator of a retailer’s performance.

As retailers began reporting their monthly sales figures, discounters had solid gains.

Wal-Mart said it had a 3.2 percent gain in same-store sales in July, in line with the 3.1 percent forecast of Wall Street analysts surveyed by Thomson First Call. Total sales rose 10.9 percent.

At Wal-Mart’s store division, same-store sales were up 2.4 percent, while results at Sam’s Clubs were up 7.7 percent.

At Target Corp., same-store sales were up 3.8 percent, better than the 2.8 percent gain that Wall Street projected. Total sales were up 8.8 percent.

Given consumers’ return to frugality, it wasn’t surprising that the discounters would outperform other retailers. Higher interest rates have slowed mortgage refinancings, which means many consumers have less free cash to spend on non-essentials. And also gas prices have dipped somewhat, they are still quite high and taking a big chunk out of household budgets.

For many mall-based apparel stores, the month proved challenging.

Major Market Indices

Gap had a 5 percent decline in same-store sales, much worse than the 0.8 percent decrease Wall Street forecast. Total sales fell 3 percent.

“Although sales of summer product at Gap, Banana Republic and Old Navy were strong in May, June’s soft traffic trends continued into July, making summer clearance results disappointing overall,” said Sabrina Simmons, senior vice president, treasury and investor relations in a statement.

Talbots Inc., had an 8.8 percent decline in same-store sales, worse than the 0.3 percent forecast. Total sales were down 3 percent.

“Our July comparable store sales results were weaker than expected, due entirely to significantly softer than anticipated markdown selling midway into our semi-annual sale,” said Arnold B. Zetcher, chairman, president and chief executive officer, said in a statement.

Teen retailer Pacific Sunwear of California Inc. announced a 6 percent gain in same-store sales, just short of the 6.2 percent forecast. Total sales rose 16.1 percent.

High-end stores like Neiman Marcus Group and Saks Inc. continued to please Wall Street.

Neiman Marcus reported a 16.6 percent gain in both same-store sales and total sales. Wall Street anticipated an 8.8 percent gain in same-store results.

Saks Inc., which operates Saks Fifth Avenue as well as moderate price stores like Carson Pirie Scott, reported a 5.5 percent gain in same-store sales, above the 5 percent Wall Street anticipated. Total sales rose 7.3 percent.

Among more traditional department stores, Kohl’s Corp. recorded a 4.2 percent decline in same-store sales, worse than the 3.9 percent Wall Street forecast. Total sales rose 10 percent.

Federated Department Stores Inc. posted a 3.7 percent increase in same-store sales, below Wall Street’s forecast of 5.4 percent but in line with company expectations. Total sales rose 3.6 percent.

May Department Stores Co. had a 5.5 percent decline in same-store sales, below the 2.4 percent analysts anticipated. Total sales were down 5.3 percent.

Dillard’s, Inc. reported a 4 percent decline in both same-store and total sales. Analysts projected a 2.4 percent same-store decline.

On Wednesday, American Eagle Outfitters Inc., reported same-store sales were up 21.7 percent, well exceeding analysts’ forecast for a 11.7 percent gain. Total sales were up 31 percent. Based on stronger sales, the company raised its second-quarter earnings outlook.

Hot Topic, Inc., another teen retailer, announced on Wednesday a 5 percent decline in same-store sales for the month, better than the 6.2 percent analysts expected. Total sales rose 13 percent.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Discuss:

Discussion comments

,

Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 5.05%
$30K home equity loan FICO 5.67%
$75K home equity loan FICO 4.85%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.42%
13.42%
Cash Back Cards 17.94%
17.94%
Rewards Cards 17.15%
17.15%
Source: Bankrate.com