Sluggish July sales show tight-fisted consumers

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NEW YORK (AP) – Shoppers, worried about job security and finding fewer options among the sales bins, remained tight-fisted during July, resulting in sluggish sales for many merchants and raising concern about the back-to-school shopping season’s health.

As merchants reported their sales figures today, mall-based chains continue to be hit hardest as consumers focus on necessities. Among the disappointments were Macy’s Inc. and teen retailers Abercrombie & Fitch Co. and Wet Seal Inc.

Among the few bright spots was discounter TJX Cos., operator of the T.J. Maxx and Marshalls chains, which reported a sales gain that exceeded Wall Street estimates.

“The consumer is stressed and depressed,” said Ken Perkins, president of retail consulting firm Retail Metrics. “Back-to-school shopping season is going to be very late.”

Perkins added that jobs are “everything right now,” and if the pace of job losses continues to slow, consumers will start to feel better.

A number of special factors also depressed July’s sales results. Lean inventories left fewer clearance options for bargain hunters, as stores wanted to protect themselves from getting stuck with piles of leftovers. The shift of the sales-tax holidays from July to August in most of the 14 states that have them because of a late Labor Day weekend also stole momentum from July.

In Colorado Springs, the retail environment has been more stable, said David Moss, general manager of Chapel Hills Mall.

“Overall, for the year, we’ve been slightly down, but have held steady,” he said. “Traffic in the mall was up the last two weeks of July, and many retailers saw a nice uptick in sales for the second half of the month.”

He attributed the region’s stability to the military.

“We’ve been a lot more resilient,” Moss said. “Our lows have not been as low and our highs not as high (compared to national numbers). We’ve been much more stable.”

Frank Badillo, senior economist at consulting group TNS Retail Forward, and other analysts have also noted that the uptick in car buying spurred by the government’s “cash for clunkers” program might siphon sales from other categories like clothing and home furnishings. That could hurt back-to-school shopping as consumers shift available cash to car payments.

The International Council of Shopping Centers-Goldman Sachs tally fell 5 percent in July compared with the year-ago period. July’s pace was in line with the 5.1 percent drop in June and worse than the 4.5 percent decline averaged since February, the beginning of retailers’ fiscal calendar. Michael Niemira, ICSC’s chief economist, estimates that the tax holiday factor depressed July’s results by 0.5 percentage points and will boost August’s sales figures by the same amount.

Same-store sales are sales at stores open at least a year and are considered a key indicator of a retailer’s health.

July’s decline marks the 11th consecutive monthly drop when excluding Wal-Mart results – which had buoyed the industry in the spring before it stopped reporting monthly numbers.

Merchants are seeing indications that sales decreases are easing. However, business remains weak even amid signs of economic stabilization.

A worrisome sign for merchants – and the broader economy of which consumer spending makes up 70 percent – is a 1.2 percent decline in consumer spending and a 5.2 percent increase in the savings rate in the second quarter.