Retailers Report Disappointing July Sales

NEW YORK -- The back-to-school shopping season had a disappointing start in July as consumers rattled by a weakening housing market and other financial pressures stayed away from stores and malls.

As merchants reported sluggish monthly sales results Thursday, the weakest performers were mall-based apparel chains, particularly teen merchants like Pacific Sunwear of California Inc. and Wet Seal Inc. Wal-Mart Stores Inc. posted a slim gain but warned that its increased discounting are hurting profit margins.

Among the few standouts were J.C. Penney Co. and Costco Wholesale Corp., both of which beat expectations.

"Overall, July sales were negatively impacted by soft mall traffic," said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass. "The consumer is holding up, but certainly feeling the pinch of the housing market and higher gasoline price."

July's results extended the slowing sales trend retailers have experienced since February as consumers are forced to pay more for food and gas. The slumping housing market and a widening credit crunch, both of which have made the stock market turbulent, are also making consumers shy about spending.

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Wal-Mart posted a 1.9 percent gain in same-store sales or sales at stores open at least a year. Same-store sales are considered a key barometer of a retailer's health. The results beat the 1.5 percent estimate of analysts surveyed by Thomson Financial, and the discounter said it was encouraged by positive early signs in back-to-school and back-to-college categories. However, it acknowledged that apparel and home furnishings were again weak and are expected to remain so through the third quarter.

The discounter also said that while customers are responding to its move to cut prices on more than 16,000 products started in July, the heavier discounting is hurting profits.

Costco reported a 7 percent increase in same-store sales, exceeding the 5.5 percent estimate, while J.C. Penney posted a robust 10.8 percent gain in its department store business, exceeding the 9.8 percent estimate.

Macy's Inc. had a 1.4 percent decline in same-store sales for the month, in line with the 1.5 percent analysts expected.

Limited posted a 3 percent same-store sales drop, worse than the 0.5 percent forecast.

AnnTaylor Corp. posted a 5 percent decline in same-store sales, worse than the 3.4 percent expected.

Wet Seal suffered a 7.2 percent decline, worse than the 5.0 percent projection, while Pacific Sunwear had a 4.6 percent slide; analysts anticipated a 3.2 percent gain. Bebe Stores Inc. posted a 6.3 percent decline, steeper than the 4.6 percent forecast.

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