Weak retail sales in June raise worries

After yet another weak month, retailers are preparing to fight for their share of crucial back-to-school shopping. But they may have to keep discounting to keep consumers coming in, given escalating job uncertainty.

Particularly worrisome in yesterday's same-store sales reports: mall-based teen stalwarts like Abercrombie & Fitch were among those hit hardest as families looked for bargains.

Wal-Mart Stores Inc., the world's largest retailer, is expected to be a big winner as it woos young shoppers with trendy electronics and fashions, but its sales are no longer included in the monthly data.

Target Corp., which has been stumbling because of its reliance on non-essentials like trendy jeans and towels, reported a worse-than-expected decline in same-store sales of 6.2 percent. Same-store sales -- sales at stores open at least a year -- are considered a key indicator of a retailer's health.

"We don't see signs of recovery. This is not going to be a consumer-led boom anytime soon," said Michael Dart, a retail strategist and leader of private equity practice for consulting firm Kurt Salmon Associates.

Ken Perkins, president of retail consulting firm Retail Metrics LLC., agreed, noting that the June retail reports indicate that many parents will forgo brands in favor of the lower-priced items and will buy less overall.

"Instead of buying four pairs of pants, they will buy three or two," Perkins said. "There will be a continued focus on need-based and discounted items."

Retailers in all sectors reported weak same-store sales for June, but mall-based clothing stores suffered most compared with a year earlier, while some discounters scraped by.

At Abercrombie & Fitch which has seen its fortunes reverse as young shoppers pull back on higher-priced brands, same-store sales fell 32 percent in June, even more than expected. American Eagle Outfitters Inc. reported a 11 percent drop.

The International Council of Shopping Centers-Goldman Sachs same-store sales tally for June was down 5.1 percent, worse than the latest forecast for a 4.5 percent decline. The results were slightly worse than the sluggish average declines of 4.4 percent seen since February, the start of most retailers' fiscal year.

Still, Michael P. Niemira, the shopping center group's chief economist, said he sees positive signs -- like solid results at Ross Stores Inc. and TJX Cos., which offer name-brand apparel at discounts -- that he believes could augur a spending recovery. He is hopeful the current government stimulus package will bolster the economy later this year.