July 15, 2010
Retail sales' dip trims merchants' hopes for back-to-school season
By Maria Halkias / The Dallas Morning News
Retail sales fell in June for the second straight month, the Commerce Department reported Wednesday. It's not the result stores were looking for as they gear up for back-to-school shopping, the industry's second-biggest season after Christmas.
While retail sales are still higher than a year ago and apparel sales bucked the overall trend by posting an increase last month, June's 0.5 percent decline from May could be an indication that the consumer-driven recovery will be slow in the second half of this year.
Back-to-school spending, forecast to reach $55 billion this year by the National Retail Federation, is often an indicator of holiday spending.
American families expect to spend an average of $606.40 on back-to-school clothes, shoes, supplies and electronics, compared with $548.72 last year and $594.24 in 2008, according to a survey conducted for the retail industry trade group.
The industry still remains "cautiously optimistic about recovery," said NRF chief executive Matt Shay. "As the second half of the year gets under way, retailers will gauge their customers' spending appetites, which often serve as a bellwether for the all-important holiday season."
More parents this year said they'll be buying store and generic brands. And more will be comparison shopping online.
So stores are dishing up the specials.
Target is offering 5 percent back on purchases with its store-brand credit card and expects to increase comparable store sales up to 2 percent. Walmart.com is offering free shipping on school uniforms.
Staples is back with 1-cent deals on reams of paper and $1 mini staplers, while some require a $5 minimum purchase. At Sports Authority, online shoppers get $15 for spending $75.
Chains are holding contests. Academy Sports & Outdoors is giving away 10 Dell laptops and gift cards. J.C. Penney Co. is looking for aspiring fashionistas to embellish denim. The Plano-based department store chain is also sponsoring an "augmented reality" experience on Seventeen magazine's website that lets shoppers "try on" clothes from home.
"Retailers are now in a pickle, having bought into the consumer recovery and increased inventory levels to support the hypothetical demand," said Brian S. Sozzi, analyst at Wall Street Strategies Inc.
June's Commerce Department results support the view that consumers are taking "a pause to reassess their personal finances," Sozzi said. "We expect back-to-school shopping promotions to begin in earnest later this month."
One good sign in June's sales report was an increase in discretionary areas, Sozzi said, such as department stores (up 1.1 percent), electronics (up 1.3 percent) and health and personal care (up 0.5 percent).
Furniture sales, however, continue to reflect a weak housing market and tight credit.
June's drop to $360 billion followed a 1.1 percent fall in May. Excluding autos, spending was down 0.1 percent in June, missing a consensus forecast for a flat month.
Retail apparel sales increased after two months of declines. Clothing and accessories store sales increased 0.6 percent in June from May to $18 billion.
Spending on apparel will take up the majority of consumers' budgets with the average family of school-age kids expected to spend $225.47 on jeans, shirts and other types of clothing, according to the NRF survey.
Many will be buying school uniforms. One of the largest school uniform companies, French Toast, expects uniform sales to increase 3 to 5 percent this year. The chain's proprietary research shows that one in five public school students now require uniforms.
"It's still a huge, important business for us and every year more schools require uniforms," said Mike Boylson, Penney's chief marketing officer. This year, Penney is pushing ways to personalize uniforms "to create a sense of style" with leggings, headbands and other accessories.