Reuters

(Reuters)

Retailers' June Sales Get Lift From Bargains

Retail Reuters

Top U.S. retailers reported better-than-expected sales for June after luring shoppers with bargains that analysts and shoppers alike say they will have to keep up for back-to-school.

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The 25 chains tracked in Thomson Reuters' monthly sales tally reported a 6.5 percent gain in sales at stores open at least a year, beating the 4.9 percent rise that analysts expected.

All but four reported increases, suggesting retailers by and large have grown savvier in offering well-targeted discounts without compromising sales numbers.

J.C. Penney was a notable exception, missing estimates and cutting its quarterly earnings forecast after it had to do too much discounting. Its shares fell 1.4 percent.

Consumers remained under pressure last month from high food and gasoline prices, prompting retailers to offer deals to get them to shop. The strategy apparently succeeded.

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"They are very focused on making the right offer to the consumer, in contrast to the uneducated sales we saw during the crisis," said Janet Hoffman, global managing director for Accenture's Retail Practice. "The sales now are much more targeted."

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The International Council of Shopping Centers expects retailers to keep their momentum in July, forecasting a same-store sales jump of 4.5 percent to 5.5 percent.

Shoppers also got a break from an improving job market. U.S. private employers added far more jobs than expected in June, bouncing back from a surprise slump the month before, a report by a payrolls processor showed.

BACK-TO-SCHOOL BARGAIN HUNTING

Many analysts caution against reading too much into the strong numbers from June, since that is when retailers typically cut prices on spring and summer items to make room for back-to-school and fall merchandise.

Stores will probably have to keep offering discounts during back-to-school, which accounts for about one-sixth of total retail sales and is the most important shopping period after the holiday 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.

Shoppers said early deals prompted them to spend.

Lizzie Widhelm, a 33-year-old mother of three from Pacific Palisades, California, already has bought uniforms and backpacks. "There were such good early sales," she said.

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."

BEATING EXPECTATIONS

Macy's said same-store sales rose 6.7 percent in June, helped by its upscale Bloomingdale's chain, and raised its quarterly sales forecast. Target Corp's comparable sales rose 4.5 percent, while big gains at Victoria's Secret helped parent Limited Brands Inc easily exceed a 3.8 percent forecast with a 12 percent jump.

Only three of 24 chains that Wall Street tracks missed expectations.

The Standard & Poor's Retail Index was up 2.1 percent, outpacing the broader S&P 500's 0.8 percent gain. Target shares were up 6.5 percent, while Dillard's rose 7.5 percent.

Penney conceded that it had to use more promotions to try to win over its shoppers. It now expects quarterly same-store sales to rise about 1 percent to 2 percent, down from its prior forecast of 3 percent to 4 percent.

The company forecast quarterly earnings of 6 cents per share, including charges, down from May's outlook of 20 cents to 24 cents, including about 6 cents in charges.

Penney rivals Kohl's Corp and Dillard's fared much better. Kohl's, where same-store sales were up 7.5 percent, has benefited by having exclusive rights for merchandise that accounts for half of its sales.

At the other end of the price spectrum, high-end department store chains Saks Inc and Nordstrom Inc easily beat Wall Street forecasts. Saks' comparable-sales rose 11.9 percent, and Nordstrom's, 7.9 percent.

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