Retail sales slow in June; discounters fare best

The Baltimore Sun

Alfredo Cardona of Santa Ana, Calif., has always liked buying his clothes at Nordstrom, but lately he's switched to Burlington Coat Factory, where the prices are lower.

The 24-year-old financial adviser said he now shops "anywhere you can save." And he's not alone.

Retailers posted moderate sales results for June yesterday as shoppers kept spending but tried to get more for their money.

Wall Street celebrated the sales report with major gains yesterday, seeing evidence that the retail economy was not collapsing amid a nationwide housing downturn.

But retail experts also saw an increased price consciousness among consumers.

Sales dropped on average at department stores, but rose more than expected at warehouse stores.

"I think it's a story of price," said Michael Niemira, chief economist for the International Council of Shopping Centers. "With a softer feel to the economy, there's been a shift to the discounters and wholesale clubs."

Sales at stores open a year or more rose 2.4 percent to $71.3 billion, which was better than expected but down from last year's 3 percent gain, according to the shopping-center council's tally of 50 major chain stores nationwide.

Consumers are fretting over a variety of problems, retail experts say, including a slowing housing market and higher prices for food and gasoline.

"You never know, week-to-week, am I going to put $50 in my car, or is it going to be $35?" said Phil Rist, vice president of strategy for BIGresearch, a consumer intelligence firm that surveys 8,000 shoppers a month. "The average consumer starts thinking, 'What's next?' Maybe I just need to slow down a little bit.'"

June, however, wasn't as bad as some retail gurus were expecting. And it's an important month, during which retailers cut prices so they can move merchandise and make way for back-to-school offerings.

Typically, June is the second-largest sales month, after December.

Some retailers made the most of it. As a group, warehouse stores posted a sturdy 6.3 percent jump.

But department stores collectively slid 2.5 percent. Of the 47 chains monitored by Thomson Financial, 53 percent missed expectations.

Department store giant Macy's Inc. took a sizable whack at its second-quarter profit projections after its 2.7 percent same-store sales dip in June. The parent of the Macy's and Bloomingdale's chains said it now expects to earn 20 cents to 30 cents a share, rather than the 35 cents to 45 cents it had predicted earlier.

Sears Holdings Corp., which operates the Sears and Kmart chains, cut its second-quarter profit expectations this week while Home Depot Inc. warned that its annual profit may fall 15 percent to 18 percent.

The world's largest retailer didn't disappoint in June. Wal-Mart said grocery sales helped advance its same-store sales by 2.4 percent, as its Sam's Club warehouse club division bounced ahead 6.9 percent.

Eduardo Castro-Wright, chief executive of U.S. Wal-Mart Stores, said in a statement that consumers today are "challenged financially."

"Gas prices have moved to be their chief concern in our latest survey, and they appreciate the opportunity to save on everything," he said.

Leslie Earnest writes for the Los Angeles Times.

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