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Jul 7, 2011
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June retail sales get lift from bargains

By
Reuters
Published
Jul 7, 2011

July 7 - Top U.S. retailers are on pace to report better-than-expected sales gains for June after bargains lured shoppers contending with a wobbly economy.


Stores will probably have to keep offering discounts as they kick off the important back-to-school season. - photo: corbis

The first set of results, including a 14 percent gain in sales at stores open at least a year at Costco Wholesale Corp, suggested that retailers generally beat Wall Street estimates.

Analysts expected the 25 chains in Thomson Reuters' monthly sales tally to post a 4.9 percent rise in June same-store sales, compared with a year-earlier increase of 3.1 percent.

Yet consumers remained under pressure last month from high food and gasoline prices, and leading retailers found themselves offering deals to get them to shop, which could pressure quarterly margins.

Stores will probably have to keep offering discounts as they kick off the important back-to-school season.

"While consumers showed a willingness to spend, July is where consumers can pull back and think about where they can get bargains," said David Bassuk, a managing director at consulting firm AlixPartners.

The first 10 companies that posted June sales for which Wall Street had estimates, including drugstore Walgreen Co and teen retailer Hot Topic, beat forecasts.

Limited Brands Inc easily exceeded a 3.8 percent forecast with a 12 percent jump. Big gains at Victoria's Secret mitigated somewhat disappointing sales at its Bath & Body Works chain.

Retailers such as Target Corp, J.C. Penney Co, Gap Inc and Saks Inc will report later on Thursday morning.

NERVOUS SHOPPERS

Consumer confidence took a hit in June as shoppers fretted about high unemployment, prompting many to open their purses and wallets only tentatively.

"The economy has changed (my shopping habits) big-time," said Karen Anderson, a 41-year-old stay-at-home mother from Frankfort, Illinois. "I definitely wait for sales."

Easing gas prices, strong Father's Day sales and warm weather that accelerated purchases of summer clothing probably helped overall results, Retail Metrics said on Wednesday.

Discount chains, especially those that sell gasoline at lower prices, are likely to show the biggest sales gains.

Excluding gasoline sales, Costco's same-store sales rose 8 percent. Analysts expect BJ's Wholesale Club Inc to post a 7 percent gain, and only 3.1 without gas sales.

At the other end of the price spectrum, Wall Street expects Saks and Nordstrom Inc to show strong June numbers. According to MasterCard Advisors SpendingPulse, luxury spending rose 8.2 percent last month.

(Additional reporting by Jessica Wohl and Eunju Lie in Chicago; Editing by Lisa Von Ahn)

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