Copyright 2000 The Baltimore Sun Company
THE
BALTIMORE SUN
July 7, 2000, Friday ,FINAL
SECTION: BUSINESS ,1C
LENGTH: 882 words
HEADLINE:
June a weak month at stores
Gain in sales lags as gas costs, debt hinder
shoppers
Retailing
BYLINE: Lorraine Mirabella
SOURCE: SUN STAFF
BODY:
Rising gas prices, higher borrowing costs and heavier debt
loads put a crimp in spending at the nation's stores in June, leaving retailers
with disappointing sales for the month.
Even though chain store sales
rose an average 3.4 percent last month compared with June 1999, the gain lagged
behind the 5 percent average gain posted monthly for the first half of the year,
according to the Bank of Tokyo-Mitsubishi's tally of 76 large retailers.
"Retail sales in June suffered from a combination of forces, including
sticker shock at the gas pump," especially in the Midwest, said Kurt Barnard,
president of Barnard's Retail Trend Report. "Every time you fill up at the gas
pump, you're out $30 or $40. That's money out
of people's pockets they would have been spending on things you'd buy in retail
stores." The average cost of a gallon of gas has risen nearly 70 cents from a
year ago.
Also contributing to weaker sales is higher credit-card debt -
$621.4 billion in the United States - and hard-to-beat
performances from most retailers from June a year ago, Barnard said.
"It
is fair to say Americans have finally given up the habit of free spending which
they exercised so abundantly over the past year and a half," he said. "Today,
Americans will continue to buy what they want and what they need - but not on
impulse."
Disappointing same-store sales prompted some retailers to
lower earnings expectations for the second quarter.
Sales dipped 2
percent at Gap Inc., and the chain said second-quarter earnings will likely be 3
cents below the current estimate of 26 cents a share.
Sales rose 4.8
percent at Wal-Mart Stores Inc., a bigger increase than many of the retail
giant's competitors but still one of its lower monthly sales gains in a year and
a half.
Kmart Corp. sales dropped 1 percent last month.
"June
sales were disappointing," said Chuck Conaway, Kmart's chairman and chief
executive officer, who said overall sales came in below plan.
At Sears,
Roebuck and Co., sales rose just 2.3 percent and apparel sales fell off from a
year ago. But Arthur C. Martinez, chairman and chief executive officer, said he
expects second- quarter earnings to exceed expectations.
Larry
Montgomery, chief executive officer and vice chairman of Kohl's Corp., said the
chain was satisfied with its 5 percent sales gain, given that that came on top
of a 15 percent increase in June a year ago.
It is still unclear how
much retail spending has slowed because of the Federal Reserve's six
interest-rate increases in the past 12 months. But some analysts see higher
borrowing costs beginning to temper spending.
"We're beginning to see
the effect of the rising interest rates," said Jeff Stinson, an analyst with
Midwest Research. "I don't think the consumer can hold out forever in an
environment where variable rate mortgages and credit cards continue to be more
expensive.
"The question really becomes how long will the consumer pull
back and to what degree," he said.
He predicted continued weakness for
this month, and an abundance of markdowns and clearance sales to move
merchandise off the retail floor.
Apparel sales lagged during the month,
though retailers reported stronger sales in home decor, sporting goods,
appliances, consumer electronics, hardware and lawn and garden items.
Department stores suffered as they continued to lose market share to
mass discounters. They were further hurt by lagging apparel sales, analysts
said.
"A lot of the fashion that was out there really missed the mark
with the consumer," Stinson said. "If you don't give consumers a reason to buy,
then they won't."
Sales fell 1.4 percent at the May Department Stores
Co., inched up 0.5 percent at Federated Department Stores Inc. and declined 2.1
percent at J. C. Penney Co. Inc. Federated said it marked down some of its
department store merchandise to reduce inventories.
Specialty retailers
with a more targeted consumer base fared better in apparel sales in June. Sales
rose 6 percent at the Limited Inc. and 6.6 percent at Paul Harris Stores Inc.
Monthly retail sales
Company........... ....Monthly
.........Monthly.......YTD ..........YTD
.......................
.SALES*.......same-store.....sales* ......same-store
.......................
................pct. change..................pct.change
Ann Taylor stores...
.$113.7............+4.1........$495.8..........+1.3
Federated.......
....$1,416.0...........+0.5......$6,153.0..........+2.5
The Gap.....
........$1,170.0...........-2.0......$4,830.0..........-2.0
J. C.
Penney........$2,860.0...........-2.1.....$12,950.0..........-2.4
Kmart...............$3,540.0...........-1.0.....$14,390.0...........-
0.1
Kohl's
Corp............$493.1...........+5.0......$2,128.0......
.....+6.9
May Dept.
Stores...$1,240.3...........-1.4......$5,331.4..
.........-0.1
Men's
Wearhouse.....$116.9............+6.9........
$505.2...........+5.5
Sears...............$2,803.6............+2.3..
...$11,849.0...........+2.9
Target
Corp.........$3,160.0...........
+1.1.....$13,280.0...........+2.2
Wal-Mart..........$17,978.0.......
....+4.8.....$76,559.0...........+6.4
*In millions
LOAD-DATE: July 8, 2000
