Jul 7, 2009
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June sales likely rained out for US retailers

Jul 7, 2009

NEW YORK, July 7 (Reuters) - Unseasonable weather and consumers without the stimulus boost they received last year were expected to have dampened U.S. retail sales in June, analysts said.

The month was "particularly challenging" for stores selling summer products as the first three weeks were cooler and wetter than usual, according to weather tracking firm Planalytics.

Overall same-store sales for U.S. retailers are expected to post a 4.8 percent drop, data from Thomson Reuters showed. The figure excludes Wal-Mart Stores Inc (WMT.N), which stopped reporting monthly sales earlier this year.

"The consumer is still up against too many hurdles to be spending too much money," said Patricia Edwards, a retail analyst for Storehouse Partners, pointing to factors such as mounting job losses and tight access to credit.

Department stores and apparel chains are expected to post among the worst sales declines in June with a 9.4 percent and 5.1 percent drop, respectively, as shoppers kept looking for deep discounts and reserved a big portion of their money for essential items.

Such consumer thrift has resulted in solid sales for only a handful of retailers in the past year, particularly discount giant Wal-Mart.

But the decision by the world's No. 1 retailer to stop reporting monthly sales has muddied the task of measuring consumer spending, which accounts for about 70 percent of the U.S. economy.

Wal-Mart had held about 50 percent of the weighting in the monthly average.

"If everyone else's sales (are) down and we don't know what Wal-Mart did, then you don't know if this is more systemic and all the consumers are pulling back hard, or if it's just that people are shifting their spending habits," Edwards said.

Without Wal-Mart, discount retailers are expected to post an overall same-store sales decline of 5.9 percent.


Summer weather usually brings with it demand for items such as bathing suits, summer dresses and sandals.

But this June was the second-coolest in 10 years, with areas such as New York City, Boston and Chicago experiencing record rainfall, Planalytics said, dampening demand for such merchandise.

Last week, drugstore chain operator Walgreen Co (WAG.N), one of the largest retailers that still posts monthly sales, said the dismal weather hurt sales of seasonal items.

Only the last week of June showed a "strong turnaround" in temperatures, Planalytics said.

While that last week of good weather may have helped pent-up demand, other factors made it tough to nail down sales patterns, said Barclays analyst Robert Drbul.

"While our expectations are for sales trends to remain relatively stable, we believe the combination of rising gas prices, a high savings rate, and fluctuations in consumer sentiment have all led to more volatility in sales patterns and less overall visibility," Drbul said in a note.

Luxury retailers particularly have suffered as shoppers continued to shun expensive items.

But consumer demand for branded items at cheap prices have helped off-price retailers like TJX Cos Inc (TJX.N) and Ross Stores Inc (ROST.O), seen posting same-store sales increases of 0.5 percent and 1.4 percent, respectively, for June.

To add to the pressure on June sales, retailers cycled the one-year mark from 2008 when consumers leaned on their tax rebate checks, a part of which they allotted for back-to-school shopping, Edwards said.

How 2009 back-to-school sales shape up will likely serve as a precursor for holiday demand, she said.

"If you are not willing to spend to get your kid outfitted so they don't get ridiculed in high school or junior high, then holiday is going to be fairly weak." (Reporting by Aarthi Sivaraman, editing by Matthew Lewis)

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