Retailers hit by sluggish sales

  • Associated Press
  • Thursday, August 5, 2004 9:00pm
  • Business

Frugal consumer spending extended into a second month during July, giving many retailers lackluster sales gains, particularly at apparel chains including Gap Inc. and midpriced department stores.

As retailers announced their monthly results Thursday, the bright spots were luxury merchants and discounters such as Wal-Mart Stores Inc., a segment that bounced back from their doldrums in June. Still, both Wal-Mart and Target offered muted sales outlooks for August.

Analysts attributed the overall disappointing sales to the end of the mortgage refinancing boom and the continuing effects of higher gasoline prices and grocery bills, which have hurt middle-income shoppers. They said retailers should expect more of this modest sales trend going forward.

The results took Wall Street by surprise and contributed to a sharp drop in the stock market, including a 163-point slide in the Dow Jones industrial average, in Thursday’s trading. John Morris, senior retail analyst at Harris Nesbitt, said investors expected a moderate recovery in July after June’s sluggish sales.

“It throws some water on the view that June was just a hiccup and bump in the road,” Morris said. “You now have two months in a row of lackluster sales. I think we are at a critical period for forecasting the health of retailers.”

Morris said consumers are more hesitant to spend when they feel uncertain about the presidential election and the economy.

Another problem came from a lack of inventory; there weren’t enough summer clearance goods to bring people into the stores for bargains.

Given consumers’ return to frugality, it wasn’t surprising that discounters outperformed many other retailers.

Wal-Mart said it had a 3.2 percent gain in same-store sales in July, virtually in line with the 3.1 percent forecast of Wall Street analysts surveyed by Thomson First Call. The company expects August sales gains to be in the range of 2 percent to 4 percent.

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