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June Retail Sales Miss Forecasts

Thu Jul 8
By Emily Kaiser

CHICAGO (Reuters) - Major U.S. retailers on Thursday blamed unusually cool weather for disappointing June sales, with Wal-Mart Stores Inc. (NYSE:WMT - news) generating its smallest monthly sales gain in more than a year.

Wal-Mart, the world's biggest retailer, said the weather crimped demand for lawn and garden merchandise, air conditioners and even pool toys, but some analysts cautioned that June's weak performance may be a more worrisome sign of a slowdown in consumer spending.

Wal-Mart; Kohl's Corp. (NYSE:KSS - news); Target Corp. (NYSE:TGT - news); Sears, Roebuck and Co. (NYSE:S - news); Gap Inc. (NYSE:GPS - news) and Federated Department Stores Inc. (NYSE:FD - news) all reported weaker-than-expected sales at stores open at least a year -- a key retail measure known as same-store sales.

Overall, June same-store sales rose just 2.8 percent, below expectations for a 4.2 percent advance, according to research firm Thomson First Call.

The Standard & Poor's retailing index (^GSPMS - news) shed 1.4 percent near midday on Thursday.

"Is it simply weather? We know from the Weather Service that the month was cooler and wetter than normal, so that cut into the seasonal demand, but we also know from Wal-Mart that they were very much affected by gasoline prices," said Michael Niemira, chief economist for the International Council of Shopping Centers.

"When (weakness) is broad-based you can usually argue it's the economy," he added. "There is some truth to that but it's also a weather story."

Auto makers reported last week that June sales fell to a near 6-year low, supporting ideas that the economy deserved at least some of the blame for poor June retail sales.

But other analysts questioned whether Thursday's figures accurately reflected the health of the retail sector or the economy. Craig Johnson, president of consulting firm Customer Growth Partners, noted that three of the seven largest U.S. retailers -- Home Depot Inc. (NYSE:HD - news), Lowe's Cos. (NYSE:LOW - news) and Best Buy Co. Inc. (NYSE:BBY - news) -- don't report monthly sales.

"The economy is still rolling along," Johnson said, noting that Wal-Mart's total June sales rose by more than 9 percent.

Wal-Mart and other retailers have pointed to steep gasoline prices as a drag on sales. However, consumer confidence has been edging up recently, and the U.S. Labor Department (news - web sites) on Thursday said jobless claims fell to the lowest level in nearly four years.


J.C. Penney Co. Inc. (NYSE:JCP - news) was among the few bright spots, posting sales growth in line with Wall Street expectations and raising its quarterly profit forecast, helped by strong Father's Day sales.

Several specialty retailers warned of worse-than-expected profits because of the poor sales performance.

TJX Cos. Inc. (NYSE:TJX - news) trimmed its second-quarter profit forecast after same-store sales rose a disappointing 2 percent. Clothing chain Talbots Inc. (NYSE:TLB - news) and children's clothing retailer Children's Place Retail Stores Inc. (Nasdaq:PLCE - news) also warned of disappointing results, sending their stocks lower.

Most other major retailers maintained their profit forecasts, however.

Wal-Mart said June same-store sales rose just 2.2 percent, the low end of its already reduced forecast and its smallest increase since May 2003 when same-store sales rose 2.1 percent. Analysts had expected a 3.6 percent increase.

Wal-Mart and other retailers had reported robust demand in the first half of June, but temperatures turned colder around mid-month, and sales turned weaker.

Weather forecaster Planalytics said temperatures last week averaged 5 to 10 degrees Fahrenheit cooler than a year ago from the U.S. Southwest, through the Plains and into the Northeast.

Bentonville, Arkansas-based Wal-Mart forecast a modest 2 percent to 4 percent same-store sales increase for July.

The focus now shifts to the back-to-school shopping period, which peaks in August.

Sears, which has reported disappointing spring and summer apparel sales, said new clothing lines should bolster its fall lineup. Federated, parent of Macy's and Bloomingdale's, said it remains confident in prospects for the fall season.




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