July retail sales rose along with the temperatures

  • Article by: JACKIE CROSBY , Star Tribune
  • Updated: August 2, 2012 - 9:56 PM

But analysts say the soft economy still leaves plenty to worry about.

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Minneapolis-based Target Corp. said Thursday that a key revenue measure rose more than expected in July, as more shoppers visited its stores and spent more on their purchases. Revenue at stores open at least a year rose 3.1 percent in the four weeks ended July 28. The increase was greater than Wall Street predicted. Grace Carlson, 6, waited her turn while her mom, Ann, and sister, Claire, 11, shopped for school supplies Thursday afternoon, August 2, 2012 at the Target on York Ave. S. in Edina, Minn. They live in Edina.

Photo: Jeff Wheeler, Star Tribune

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Discounts and warm weather helped boost retail sales in July, lifting hopes for a strong back-to-school season.

Minneapolis-based Target joined Macy's and the Gap as winners in what usually is a slow month, as retailers move out summer stock and ramp up merchandising efforts for school shoppers.

Sales among the nation's retailers rose 4.4 percent, according to Retail Metrics, a result that company analyst Ken Perkins described as an "impressive" gain and the biggest positive surprise since the end of the Great Recession.

Target's same-store sales rose 3.1 percent, outpacing analysts' expectations of 2.7 percent. Sales continue to be driven by food and staples in the health and beauty aisles, while sales of more profitable discretionary merchandise declined from last year.

"People are still seeking value in the equation," said Marshal Cohen, chief retail analyst for market research firm NPD Group. "It's the calculated consumption I've been talking about for the past year that continues to play out. Consumers are making tradeoffs; they're not just buying impulsively."

Analysts say the strong retail numbers don't ease concerns about the soft economy. Consumer confidence remains at low levels and fears of a European recession and slowdown in China continue to put a drag on any willingness to splurge.

Teens and college students have had a hard time landing summer jobs and will be heading into August without much spending money.

Nonetheless, the outlook is upbeat for August, according to the International Council of Shopping Centers (ICSC). The industry group expects families to spend an average of $300 during the back-to-school shopping season, with more than 8 in 10 planning to buy supplies and new outfits at a discount store.

Consumers view buying school supplies and a few new outfits as essential, regardless of the economy, according to Michael Niemira, an economist with the ICSC.

Target is preparing for a strong season, projecting August sales to increase by a percentage in the low to mid single digits.

The company said July sales were in line with expectations. Shoppers are hitting stores more often and spending more when they get there, though the recession-era mindset remains fully ingrained.

The consumer environment "remains quite challenging," Target CEO Gregg Steinhafel said in a statement.

Steinhafel said Target stores saw "healthy increases in traffic and sales," as shoppers took advantage of 5 percent discounts from the company's branded REDcard and responded to merchandising improvements in remodeled stores.

Sales at the Gap, the nation's largest specialty retailer, rose 10 percent, shattering analysts expectations of 3.8 percent and prompting the company to raise its earnings outlook.

Macy's rose 4.1 percent, buoyed by its MyMacy's localization strategy to tailor merchandise to individual stores and markets.

Cohen predicts the back-to-school season will be "longer and slower, but still robust." Consumers on budgets likely will be shopping into September and October, well beyond what retailers have traditionally expected.

They'll buy supplies and other essentials first, and then look for consumer electronics, he predicted, and will wait until school starts to freshen up their wardrobes.

"The consumer is in the driver's seat this year," Cohen said. "There are so few trends, so many products, so many places to buy, they don't have to rush to buy anything."

Jackie Crosby • 612-673-7335

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