Retailers fear shopper pullback

Shoppers remained tight-fisted in July, raising concern about the back-to-school and holiday shopping seasons as well as for the broader economic recovery.

The big worry is that frugal parents will focus on outfitting their children this fall only with necessities like notebooks and jeans. And fear is bubbling up that frugal parents might consider any extra splurges early Christmas gifts.

The persistent pullback, despite signs of a stabilizing economy, could stall the overall recovery as consumers account for 70 percent of all economic activity.

"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."

Michael Dart, a retail strategist and leader of private equity practice for consulting firm Kurt Salmon Associates, believes that based on what he has been hearing from consumers, some of those purchases may even double up as Christmas gifts as shoppers remain tight-fisted.

"Shoppers are becoming much more practical," Dart said.

The bargain-hunting played out again in the retailers' reports, with mall-based apparel stores faring the worst. Among the disappointments were Macy's Inc., Dillard's Inc. and teen retailers Abercrombie & Fitch Co. and Wet Seal Inc.

The few bright spots were apparel discounters like Ross Stores Inc., and TJX Cos., operator of the T.J. Maxx and Marshalls chains, both of which reported sales gains -- a rarity right now -- that well exceeded Wall Street estimates.

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.

NPD Group Inc. chief retail-industry analyst Marshal Cohen fears that lean back-to-school inventories, particularly at department stores, could stall sales this fall -- if shoppers can't find what they want.

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's results.

Unlike other states, Virginia's sales-tax holiday is always the first Friday-Saturday-Sunday weekend in August. This year, the tax holiday begins today.

Perkins and other analysts also have noted that the uptick in car buying spurred by the government's "cash for clunkers" program might siphon sales from other categories, such as clothing and home furnishings. That could hurt back-to-school shopping as consumers shift available cash to car payments.

A monthly compilation of results from more than 50 retailers by The International Council of Shopping Centers and Goldman Sachs showed overall same-store sales fell 5.0 percent in July compared with the year-ago period. Michael Niemira, ICSC's chief economist, estimates that the tax-holiday factor depressed July's results by 0.5 percentage points and likely 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.