June's Weak Retail Sales Darken Outlook for Back-to-School

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June's tepid retail sales numbers are already casting a pall over the industry's outlook for autumn -- and they may bode ill for the winter, too.

Though right now, we're all thinking more about the broiling heat of midsummer, July is when back-to-school shopping season launches -- a key period for the nation's stores. And back-to-school, in turn, often sets the tone for the biggest shopping spree of the year: the winter holidays.

Sales for the 20 chains in the Thomson Reuters same-store sales index rose a meager 0.1% year over year, compared to a 6.7% jump a year earlier. Retailers such as Macy's (M), Target (TGT), Kohl's (KSS) and Costco (COST) all missed analysts' sales forecasts.

Although Macy's registers busily rang up its Father's Day promotions, same-store sales overall barely budged in June, inching up just 1.2%.

"June sales were below expectations," Terry Lundgren, CEO of Macy's, said in a statement. "In part, this was a function of a macroeconomic environment that is stagnant at best."

Gregg Steinhafel, CEO of Target, echoed that in his own statement: "Our June comparable-store sales were near the low end of our expected range," he said.


And retailers shouldn't expect shoppers to be opening their wallets wider anytime soon.

"We expect sales to remained pressured in July, driven by a softer macroeconomic environment," said Deborah Weinswig, retail analyst for Citi (C).

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That should lead retailers to step up the discounts this back-to-school season, hoping to lure shoppers into stores, Weinswig says. And that includes high income consumers, whose spending has tapered off, she noted.

But if merchants want to grab shoppers' attention, they'll have to up their fashion game, Weinswig said.

The clothing choices at chains ranging from Macy's and Kohl's to upscale Nordstrom (JWN) and Saks (SKS), left shoppers cold in June, and the retailers reported sales weakness in their apparel mix.

There is a "lack of compelling new fashions," Weinswig said.

But there's one potential bright spot: Declining gas prices might give shoppers a little more discretionary income, which could draw them back into stores, she said.

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