US retailers reported July sales gains that missed analysts' estimates as consumers cut spending ahead of the back-to-school season.
Sales at 30 chains climbed 3 per cent, less than the 3.2 per cent average of analyst projections, Retail Metrics said. That's the fourth month in a row sales have trailed estimates, according to the researcher. Department-store chain J.C. Penney Co. sales fell 0.6 per cent, short of expectations for a 3.5 per cent gain.
Teen retailer Aeropostale Inc., whose sales rose at one- seventh the pace analysts predicted, said changing consumer behavior and a "challenging" retail environment hampered spending. Today's results suggest US consumers will remain cautious, said Ken Perkins, president of Retail Metrics in Swampscott, Massachusetts.
"It's clearly not the kind of momentum that retailers want to be building heading into peak back-to-school selling," Perkins said today in an interview. Same-store sales are a key indicator of a retailer's growth because they exclude results from new and closed locations.
Some retailers, such as Abercrombie & Fitch Co. and Limited Brands Inc., benefited as consumers flocked to air-conditioned malls to snap up summer clearance items. Abercrombie's July sales rose 7 per cent, twice the pace of analysts' average projection. Limited Brands sales jumped 12 per cent.
Slower Sales
Sales at Aeropostale, which has more than 900 outlets, rose 1 per cent at stores open at least a year, short of the 7.4 per cent average of analysts' estimates compiled by Retail Metrics.
July is typically the slowest month of the third quarter for retailers as they clear out summer merchandise for the back- to-school season, the second-largest sales period after the year-end holidays. Retailers are already offering discounts, with bigger promotions likely coming in August, said Howard Tubin, an analyst at RBC Capital Markets in New York.
"Business will improve in August and September as we enter the thick of the back-to-school shopping season," Tubin said before the results came out. "Teen retailers are already battling over denim."
American consumers lost confidence last month, shaken by concern over jobs and wages. The Conference Board's sentiment index fell to 50.4, below the median forecast of economists surveyed by Bloomberg News and the lowest level in five months, figures from the New York-based private research group showed last week.
More Promotions
That has led some retailers to focus more on promotions to lure customers into stores. American Eagle Outfitters Inc. was giving away a smartphone to each shopper who tries on a pair of jeans, while Aeropostale is selling all jeans for $US20. Gap Inc is offering $US20 off on those items.
"High inventory levels from key players, continued weak economic trends and the consumer shopping later and later in the season have combined to create what will probably be one of the most aggressive discounting seasons in recent memory," said Eric Beder, an analyst at Brean Murray Carret & Co. in New York.
Aeropostale today lowered its forecast for second-quarter earnings per share to a high end of 46 US cents. The teen retailer earlier predicted profit of as much as 48 US cents.
Unplanned promotions in August probably will affect retailers' profit margins, Retail Metrics' Perkins said. Hot temperatures, expected to continue this month, also don't bode well for fall shopping, he said.