Originally created 07/10/98

Mixed retail sales in June



NEW YORK -- Americans continued their shopping spree in June, the sixth straight month of gains for many of the nation's retailers who have enjoyed a strong year thanks to healthy economic times and a surging stock market.

While most merchants fared well in June, especially discount and some clothing stores, there were exceptions. Several big chains, including Sears, Roebuck & Co., Kmart Corp. and J.C. Penney Co. Inc., were hurt by unseasonably cool weather and sagging demand for athletic shoes and sportswear. J.C. Penney stock stumbled as it said weak sales would mean lower-than-expected earnings for the second quarter.

But the general trend was still upbeat.

"The consumer is still out there buying," said Joseph Ronning, a retail analyst at Brown Brothers Harriman. "Yes, we saw some problems in June, but overall, it continues to be a strong year for retailers."

In fact, many retailers are enjoying one of the best years in recent history. June's sales gains followed especially strong results in April and May, when warmer-than-normal weather set off some early buying of everything from outdoor furniture to garden supplies to sundresses.

Encouraging Americans to shop this year is a healthy economy with low inflation and unemployment levels as well as high consumer confidence.

Separately Thursday, the Labor Department reported the number of Americans filing new claims for unemployment benefits fell slightly last week although the impact of the General Motors strike pushed the average number of claims for the past month to the highest level in more than two years.

The Labor Department reported that initial filings for unemployment benefits, after adjusting for normal seasonal variations, dipped 1,000 last week to 392,000.

With retailers continuing to report strong sales, analysts believe there will be profit growth in the second quarter, which ends in late July for most retailers.

"Retailers have lean inventories and haven't marked down too much," said Walter Loeb, who runs the retail consulting firm Loeb Associates. "If this continues, most retailers can anticipate a strong quarter and second half of the year."

While overall results were up in June, there were weak spots. Especially troubled were retailers with large interests in athletic shoes and clothes, with demand for such products declining in recent months.

In addition, cool, rainy weather in the Northeast and along the West Coast also cut into some of June's gains, especially for retailers with large interest in either of those areas.

Among the hardest hit in June was J.C. Penney, which had to slash prices to clear merchandise out of its stores. That cut into its profit margins, and the Plano, Texas-based retailer announced Thursday that it would not meet its second-quarter expectations.

J.C. Penney stock sank more than 12 percent in early trading. It came back somewhat later in the day but still was down sharply, off $5.56¨, or 7.8 percent, at $65.87´ in afternoon trading on the New York Stock Exchange.

The Merrill Lynch retail index, the investment firm's barometer of sales performance at department stores and discount chains, rose 3.9 percent last month after a 6.6 percent gain in May. It was up 4.9 percent in June 1997.

Wal-Mart, the nation's largest retailer, said its sales from stores open at least a year rose 9 percent from a year earlier, while total sales were up 17.4 percent.

Sales from stores open at least a year, known as same-store sales, are considered the most accurate measure of a retailer's strength. They exclude sales from stores that have been closed and from new stores, which often have disproportionately strong sales.

Sears said its same-store sales rose 0.3 percent, while total sales gained 0.8 percent. Kmart's same-store sales rose 1.5 percent, while total sales rose 0.5 percent.

J.C. Penney said same-store sales at its department stores fell 2.1 percent and its total department-stores sales gained 2.2 percent. The company's overall results were boosted by the Eckerd drugstore division, where same-store sales rose 9.1 percent.

Dayton Hudson Corp. said same-store sales rose 4.6 percent and total sales rose 10.4 percent. Same-store sales were strongest at its Target discount stores, where same-store sales rose 4.9 percent and total sales were up 12.1 percent. The company also had strong growth at its department store division, while its Mervyn's clothing stores came in below expectations.

Federated said its same-store sales rose 3.4 percent and total sales were up 2.3 percent. May Department Stores Co. said its same-store sales rose 4.5 percent and total sales gained 6.1 percent.

Limited Inc. said same-store sales rose 1 percent and total sales were flat. Gap said its same-store sales rose 15 percent, while total sales were up 36 percent.

Ann Taylor Stores Corp. said same-store sales rose 9 percent, while The Talbots Inc. said same-store sales rose 7.4 percent.