June Retail Sales Increase but Not as Much as Expected

by Doug Desjardins

Retail sales in June were better than they were in 2009 but below expectations as consumers pulled back on spending after a brief run earlier this year.

According to a survey from MasterCard Advisors Spending Pulse, department stores posted a combined increase in sales of 1.3 percent, the first monthly increase for that retail channel since November 2006. Electronics chains were slightly better with an average increase of 2 percent and apparel retailers reported a 3.2-percent gain.

Department-store chains made the most of Father’s Day Sales to post solid gains across the board. Macy’s, one of the worst casualties of the long recession, reported a 6.5-percent increase in same-store sales compared to June 2009 and Nordstrom’s reported a 14-percent jump in sales. J.C. Penney reported a 4.5-percent increase in sales, exceeding analysts’ expectations.

Deep-discount chains also reported positive results. Family Dollar posted a 5.5-percent increase in same-store sales for June but lowered its outlook for the rest of the summer due to what its CEO described as a “volatile” sales environment. “You can see week-to-week differences (in sales) that are far more volatile than what we’ve been seeing,” said CEO R. James Kelly during a conference call with analysts.

The less-enthusiastic outlook is shared by many retailers who saw June sales increase but not as much as expected. Target reported a 1.7-percent increase in June but was projecting a 2.7-percent jump. Costco’s 4-percent increase in sales was also a disappointment, as were those of rival warehouse club BJ’s Wholesale, which registered a 3.8-percent increase.

Apparel sales were a mixed bag. The Gap posted flat sales instead of the 3.4-percent gain anticipated by analysts while Kohl’s reported a 5.9-percent jump in June sales, slightly below the 6.5-percent increase that was expected. Limited Brands was an exception, with sales rising 6 percent in June and beating analyst expectations for a 3.2-percent gain.

But at least mass merchants generated positive sales, which wasn’t the case for retailers who sell luxury goods. That category – which includes upscale clothing and accessories - reported a 3.9-percent decrease in sales for June after a promising start early in the year.

Analysts aren’t expecting July to be any better. Citigroup analyst Deborah Weinswig said this month should be a repeat of June with consumers continuing to pull back on spending. “The pricing environment has become increasingly competitive and we expect moderating July sales as the consumer hangover continues to set in.”

Credit card spending, another key indicator of consumer confidence, also continues to fall. According to government data released in early July, U.S. consumer credit card debt was 4% lower in May than in December 2009, showing consumers are using cash more often and spending only what they can afford.

Resources

U.S. Retailers Weathered a Bumpy June

Retail Sales Down in June for Second Consecutive Month of Falling Receipts

June Retail Sales a Mixed Bag as Outlook Worry Weighs