Mall, teen store sales decline

The nation's shoppers padded their savings accounts instead of their summer closets in June, as the haze of economic insecurity continues to hover.

Retailers saw sales among stores open at least a year drop 5.1 percent compared with a year ago, according to the International Council of Shopping Centers -- a bleaker tally than its 4.5 percent forecast. Mall-based stores were hit the hardest, as were many teen apparel stores, signs of weakness that could dim retailers' hopes for a bump from back-to-school sales.

It has become the kind of economy where Wall Street analysts look at the weak numbers and say: Could've been worse.

Ken Perkins of RetailMetrics Inc. said June sales beat his forecast by 0.3 percentage point.

Consumers didn't have rebate stimulus checks this time around, and the "adverse weather conditions, the highest unemployment rate in 26 years, average hourly earnings stagnant and shorter average work week, could have spelled disaster for retailers in June ... but it didn't," Perkins wrote in a report Thursday. "Sales were weak, but beat bad views."

Target's same-store sales slid 6.2 percent as consumers shopped less often and spent less when they did come into stores. The sales results were about as expected.

But the Minneapolis-based retailer is feeling buoyed by strong sales in health care and groceries, and by its ability to keep a lid on expenses. The discounter upped its guidance and said it now expects second-quarter earnings to meet or exceed the current forecast of 64 cents.

Target CEO Gregg Steinhafel said in a prepared statement that the chain's gross margin rate is strong and that it is seeing modest improvements in its credit-card portfolio. In recent months, the company has reported a drop in early-stage delinquencies.

Wal-Mart no longer reports monthly results of stores open at least a year, a key indicator of a retailers' financial health, but one that is prone to calendar shifts. Because Wal-Mart has consistently shown strong sales during the recession, its results had tended to boost the numbers for the industry as a whole.

Still, not much has changed for consumers, who need to see deep discounts before they'll open up their wallets. And even that isn't always enough to get them to shop.

Americans are hedging against a loss in income, saving more than they have in 15 years. Unemployment claims have hit a record high, and the Bureau of Labor Statistics reported earlier this week that wages are falling as employers impose furloughs, pay freezes and pay cuts. The average workweek in June fell to 33 hours, the lowest since 1964.

Even Costco posted a 6 percent decline. And stores at the high end are really feeling the pinch: Neiman Marcus' same-store sales plunged 20 percent and Nordstrom fell 10.

The cautious consumer mindset is helping Kohl's outperform its fellow department stores. Kohl's sales fell just 5.6 percent, compared with J.C. Penney, with a sales decrease of 8.2 percent, and Macy's, which fell 9 percent.

Kohl's still looks shiny

Analysts such as William Blair's Mark Miller continue to give high marks to Menomonee Falls, Wis.-based Kohl's. Miller raised its earnings estimates for Kohl's 2 cents after the sales report.

As for the teen market? "Yuck!" was the assessment from analyst Eric Beder, of Brean Murray Carret and Co.

Rainy weather may have turned sales soggy. Sales at Abercrombie & Fitch took a 32 percent dive; American Eagle crashed 11 percent; and the Gap dropped 10 percent.

There were some bright spots -- Aeropostale was up a record 12 percent and Buckle up 9.6 -- but many had double-digit declines.

But Michael Niemira, chief economist with the International Council of Shopping Centers, said in a statement that he was encouraged by the strong showing from a handful of teen retailers and some "value retailers."

"These nascent signs of improvement are important, since history suggests that consumer spending typically starts off sluggish prior to significant improvement," Niemira said.

Next up for the nation's retailers: the back-to-school season. It typically jump-starts consumer spending going into the crucial holiday period and could give economists such as Niemira more evidence that the economy is poised for a rebound.

Jackie Crosby • 612-673-7335