Business stalls as summer doldrums hit stores



Wal-Mart's chief executive said he still feels good about the year.
NEW YORK (AP) -- The dog days of summer have most certainly arrived for the nation's retailers, with business stalling in July for a second straight month following a five-month streak of robust sales.
It's hard for anyone, retailers or industry analysts, to know what's going on. Are the consumers who shopped enthusiastically for brightly colored clothes during the spring taking a short break or, worried about gas prices and jobs, have they cut back their spending indefinitely until they can feel more secure?
If you go by retail sales and earnings results issued this past week, the outlook isn't bad at all.
Upbeat forecasts
On Thursday, Wal-Mart Stores Inc., Target Corp. and Kohl's Corp. offered upbeat forecasts for consumer spending as they reported solid second-quarter profits. Meanwhile, the Commerce Department reported a 0.7 percent increase in retail sales in July, following a 0.5 percent drop in June.
"Although I am concerned about high gasoline prices, I continue to believe that growth in employment and real income will lessen the impact," said Lee Scott, Wal-Mart's president and chief executive. "I still feel good about the year."
But some economists are not yet convinced, and worry that the continuing rise in energy prices could further depress consumer spending. High oil prices could derail job growth, which was already extremely weak last month.
"How the price of oil behaves will determine how strong or weak the retail sales will be," said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis. July's sales results showed a widening sales gap between stores that target low- and middle-income shoppers, and those catering to wealthier customers who are more financially equipped to handle higher gas prices and who feel more secure in their jobs.
Hardest hit
One of the hardest-hit sectors has been mid-priced department stores like May Department Stores Co., which saw a pickup in sales earlier in the year but fell back into a decline in July. Family Dollar Stores Inc., whose customers tend to have smaller incomes, said earlier this month that sales of nonessential merchandise fell below company expectations.
"Hopefully, this will be a blip," said George Mahoney, executive vice president at Family Dollar.
Meanwhile, discounters like Target and Wal-Mart made somewhat of a recovery in July, but their results were still well below the pace of earlier this year.
Over the next few weeks, analysts will be closely watching the critical back-to-school business, which is a better indicator of consumer spending than summer sales. So far, the results have been mixed.
Among retailers that cater to teens, initial sales have run the gamut. American Eagle Outfitters Inc. reported a 21.7 percent gain in same-store sales in July, while Abercrombie & amp; Fitch suffered a 9 percent decline.
Copyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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