Discount Retailers See Modest Gains; Department Stores Tank

June sales dipped at most major retailers with the exception of some modest gains at discount stores such as Target and Wal-Mart due to a boost in the increased costs of essentials such as groceries.

Target Corp. same-store sales were up 3.3% in June, while Wal-Mart Stores, Inc. saw a 1.6% gain. Target says categories such as shoes, lawn and garden, and music and movies categories were weakest, while groceries and commodities such as health care and baby products were strongest.

Most department stores took a hit, but it was less than what some analysts had predicted, and an uptick is likely in July due to the beginning of back-to-school sales. June is considered a transitional month with stores clearing out summer merchandise to make room for the shift to fall fashions.

A calendar shift affecting dates tracked may be partly to blame. The 53rd week in fiscal 2006 created a timing shift in the 4-5-4 calendar for fiscal 2007. The month of June in fiscal 2007 began one week later than in fiscal 2006. This timing shift negatively impacted reported sales for June 2007.



"As expected, June sales were negatively affected by the shift of Memorial Day into fiscal May," says Larry Montgomery, Kohl's chairman/CEO, in a statement. "We continue to expect July's sales to benefit from a calendar shift affecting our back-to-school business."

Overall, 47% of retailers reported sales that beat analyst estimates, while 51% missed, according to Retail Metrics LLC, a research firm based in Swampscott, Mass.

Nordstrom Inc. spokesman R.J. Jones says the high-end retailer expects its July numbers to benefit from its annual anniversary sale July 20-Aug. 5. The retailer's same-store sales registered a rare rise in the category--up 2.9% in June, while J.C. Penney Co. saw same-store sales fall 1.5%, Kohl's Department Stores were down 4.9%, Macy's reported a 2.7% dip, Dillard's declined by 1% and Saks Inc. registered a 5.6% fall.

Sears Holdings Corp., the biggest U.S. department-store company, doesn't release monthly results. It reported July 10 that second-quarter profit may decline by as much as 46%. The company said this week that same-store sales fell 4% at Sears locations and 3.9% at the company's Kmart chain for the first nine weeks of the second quarter.

The teen and young adult market was mixed. Abercrombie & Fitch, a clothing retailer for teens and college students, said same-store sales were up 2%, while Gap Inc., the biggest U.S. clothing retailer, said June sales fell 5%.

Wal-Mart predicts same-store sales in July will increase 1-2%, while Target expects a 5-7% increase. J.C. Penney says it expects July comparable department store sales to rise from the low double digits to mid-teens, and its comparable direct sales to be up in the low-single digits, while Kohl's expects July's comparable store sales to increase in the mid-single-digit range. Macy's expects same-store sales in July to be flat to down 3%.

Same-store sales are an industry benchmark because they exclude results from new or closed locations.

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