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Retail sales data disappoint

By Shan Li and Dalina Castellanos, Los Angeles Times –

LOS ANGELES — Consumers anxious about the economy kept their wallets in check, raising worries of a possible slowdown in spending during the crucial back-to-school shopping season that begins later this month.

Major retailers posted a sales gain of just 0.1 percent in June, the worst monthly showing since August 2009. The sales numbers disappointed retail analysts, many of whom expected sales to rise about half a percent, according to Thomson Reuters’ survey of 20 retail chains.

Some analysts warned that the coming months could spell more bad news for retailers if a gyrating stock market and weak economic indicators continue to damp spending.

“Any way you slice it, June has to be considered a disappointing month for retailers. Almost 70 percent missed expectations,” said Ken Perkins of Retail Metrics Inc. “It’s worrisome for back-to-school shopping.”

At Los Angeles’ Beverly Center shopping center, some shoppers said they felt anxious about their financial security and bought only items that were sharply discounted.

Chad Fishburne, 35, and Stacey Turner, 38, said they were at the mall only because Macy’s was having a sale on electric griddles. The West Hollywood, Calif., couple, both actors with incomes that change from month to month, said they carefully set and follow budgets for food and other necessities.

“We try to take advantage of good deals,” Fishburne said, showing off the griddle they just scored for $18.99. “Money’s a little tight.”

Industry analysts said the anemic sales gains in June were somewhat skewed by unseasonably warm weather this spring, which pushed many people to buy summer clothing earlier in the year.

But a stubbornly high unemployment rate and poor financial news from around the world — including recent signs of a worse-than-expected downturn in China’s economy — have curbed people’s urge to shop, analysts say. The Conference Board said that consumer confidence fell in June for the fourth straight month.

“Spending has been declining, savings has been increasing and manufacturing has declined,” said Robin Lewis, a retail consultant and chief executive of the Robin Report, a retail industry publication. “There is no demand out there, and it’s mainly due to the unemployment needle not moving.”

Industry watchers say that conflicting data about the job market have heightened consumer uncertainty. Payroll provider ADP recently reported businesses hiring more workers in June, and the Labor Department said Thursday that unemployment claims dropped last week. But economists are predicting that the national unemployment rate, to be released Friday, will stay at 8.2 percent.

Retailers that performed well last month were a mix of high- and low-end stores. Action-sports chain Zumiez Inc. led the way with an 8.2 percent increase. Luxury department store Nordstrom posted an 8.1 percent rise and Saks saw sales rise 6 percent. Discounters fared well too, with off-price retailers Ross Stores Inc. and TJX Cos. both reporting a strong 7 percent increase. Costco Wholesale Corp. said sales rose 3 percent.

Other retailers did not fare as well. Struggling teen clothier Wet Seal said sales fell 9 percent, while Kohl’s Corp. reported a 4.2 percent drop. Many other chains reported a drop in sales, offsetting gains made by several major retailers.

Results are based on sales at stores open at least a year, known as same-store sales and considered an important measure of a retailer’s health because it excludes the effect of stores’ openings and closings.

Retailers are now looking ahead to the back-to-school season, which is typically the second-largest sales driver of the year (after the winter holidays), accounting for more than 15 percent of the industry’s annual sales. Analysts say retailers will trot out sales, promotions and discounts in hopes of enticing parents and their kids to buy.

But unless hiring picks up briskly, “back-to-school is going to be very weak,” said Britt Beemer, a retail expert at America’s Research Group.

Beemer said that during the recession, parents had taken to buying only the bare necessities for children heading back into the classroom, putting off apparel purchases until Christmas to ensure there were gifts under the tree. That trend probably will continue this year, he said.

In downtown Los Angeles, Martha Lorenzo, 37, said she’s waiting until there are big sales to buy school clothes for her 16-year-old daughter. After relying on her husband’s income for the past few years, the West Los Angeles homemaker plans to find a job soon to bring in much-needed cash.

“Maybe when I start working again we can shop more,” Lorenzo said. Until then, “we just can’t go shopping.”

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