Economic Fears Take Toll on Retail Sales in June

A shopper carries Saks Fifth Avenue bags up Fifth Avenue in New York City.
Getty Images
A shopper carries Saks Fifth Avenue bags up Fifth Avenue in New York City.

Retailers reported largely disappointing sales in June, as consumers pulled back on spending amid concerns about jobs and the economy.

Thomson Reuters was expecting its same-store sales index to inch up 0.5 percent in June, far weaker than a year-ago when the index rose 6.7 percent in June. However, when the results were in, the index only rose 0.1 percent, as many retailers fell short of analysts' estimates.

Although June tends to be a weaker month on the retail calendar with fewer reasons to drive shoppers to the store, some retailers said the weak results were enough to hurt their earnings forecasts.

The weak results also raise some concerns heading into the back-to-school shopping season, which is the second busiest time fror retailers after the Christmas holiday period.

Department store Macy's said its same-store sales rose 1.2 percent in June, short of the estimate from Thomson Reuters, which called for a 1.9-percent gain. Macy's now expects its fiscal 2012 earnings to be between $3.25 and $3.30 a share, which is below the $3.37 a share average analyst estimate, reported by Thomson Reuters.

NBG Productions analyst Brian Sozzi said Macy's may have signaled bad news was ahead in May when it failed to raise its forecast after it released its May sales report.

Macy's CEO Terry Lundgren said the economy was partially responsible for its weak sales.

'Stagnant' Economy

"June sales were below expectations. In part, this was a function of a macroeconomic environment that is stagnant at best, and lower spending by tourists in cities such as New York," Lundgren said in a press release. The company also said renovations at Macy's Herald Square in New York City, also caused "short-term business disruption."

Cato and Fred's each warned that the weak sales trends would like mean their earnings would be at the low-end of their respective forecasts. Both stores cater to lower income consumers.

Sozzi also noted that Bon-Ton suggested that sales trends are "only consistent when promotional activity is amplified with marketing support." This also suggests some potential weakness among lower income consumers.

Discounter Target also reported weaker-than-expected same-store sales growth, but it reiterated its earnings forecast for its fiscal second quarter. Still, Target shares were trading lower Thursday.

As for the pockets of strength, they were found at the high-end. Both Nordstrom and Saks topped analysts' estimates as did off-price retailers TJX and Ross Stores .

Still Sozzi, was cautious regarding Saks' performance, as he said some of the sales they rung up were driven by private-label and lower-priced goods.

Limited Brands , the parent of Victoria's Secret and Bath and Body Works, also smashed its final estimates. The retailer reported an increase of 7.0 percent in sales at stores open at least 12 months. Analysts surveyed by Thomson Reuters were expecting, on average, a gain of 2.4 percent.

Limited's reported an 11-percent same-store sales gain at Victoria's Secret.

"What's driving Victoria's Secret is two things," said Dana Telsey, CEO and chief research officer of Telsey Advisory Group. "No. 1 is the continuos flow of new product launches at competitive prices; No. 2 is the Pink category. The Pink category has expanded from beyond just intimate apparel to loungewear, too, and it's younger and newer."

Telsey said she is watching trends with international retail sales and the back-to-school shopping season very closely.

According to Telsey, hot weather may make it tough to move back-to-school items unless they are competitively priced.

This is noteworthy considering that some of the weakest results came from teen apparel retailers Wet Seal and The Buckle . Sales declined 9 percent at Wet Seal, far deeper than the projected 7.7 percent decline that was expected.

At the Buckle, sales fell 2.5 percent, compared with estimates that called for flat sales.

A table of the results follows:

Same-Store Sales, June 2012

June 2012 Estimates
June 2012 Actuals
Costco Wholesale 3.7% 3.0%
Target 2.4% 2.1%
Fred's 0.2% (4.0%)
Kohl's Department (3.2%) (4.2%)
JW Nordstrom 4.7% 8.1%
Saks Department Store 4.7% 6.0%
Stage Stores 2.7% 3.3%
Macy's 1.9% 1.2%
Gap 0.1% Breakeven
TJX 4.2% 7%
Limited 2.4% 7.0%
Ross Stores 4.8% 7.0%
Stein Mart 2.0% (0.5%)
Wet Seal (7.7%) (9.0%)
The Buckle Breakeven (2.5%)
Zumiez 8.4% 8.2%
Source: Thomson Reuters, company reports. Figures in parenthesis are losses.

Typical Story Inserts (as found in CNBC/Components/Data-Market folder):