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Retailers report very strong June sales

July 7, 2005

According to the International Council of Shopping Centers, the preliminary sales tally of sixty-six stores grew 5.3 percent in June, higher than the 4.5 percent forecast that was revised upward throughout the month. The sales performance was the retail industry's best showing since May of last year, when the index was up 5.7 percent.

The arrival of summer weather gave the nation's retailers their best showing in more than a year in June, with even recent laggards like Wal-Mart Stores turning in solid results.

As sales figures were released today, the winners crossed all retail sectors, including discounters, wholesale clubs such as Costco Wholesale, department stores like Nordstrom and J.C. Penney, and teen retailers such as Abercrombie & Fitch. A handful of companies including TJX Cos. and Family Dollar had disappointing results, but they were the exceptions.

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Overall, "the final results were terrific," said Ken Perkins, president of Retail Metrics, a research firm in Swampscott, Mass. "There was broad-based strength across all retail segments."

He added, "Consumers clearly seemed to shrug off higher oil prices. And it didn't seem to bother the low-income consumers."

A series of explosions rocked London today in what Prime Minister Tony Blair called terrorist attacks, a possible source of anxiety for U.S. consumers. But Perkins said he forsees no big impact on American retailers as long as there are no other attacks.

The International Council of Shopping Centers-UBS preliminary sales tally of 66 stores surged 5.3 percent in June, better than the 4.5 percent forecast that was upgraded throughout the month. The performance was the retail industry's best showing since May 2004, when the index was up 5.7 percent, according to Michael P. Niemira, chief economist at the International Council of Shopping Centers.

The tally is based on same-store sales, or sales at stores opened at least a year. Same-store sales are considered the best indicator of a retailer's strength.

Niemira noted the strong sales gain was helped in part by easier comparisons with June 2004, when the tally had a weaker 3.0 percent gain.

Still, June's solid performance was a relief for retailers, who had only modest increases the past three months, when lower-than-normal temperatures hurt demand for seasonal merchandise, including clothing. Although oil prices passed $60 a barrel for the first time last month, consumer confidence rose to better-than-expected levels as shoppers shrugged off energy's advance and focused on an improving job market.

The latest report on unemployment claims, released by the Labor Department today, indicated that the job market is indeed recovering.

While the number of new people signing up for unemployment benefits rose last week, it was mostly due to layoffs related to temporary shutdowns at auto plants as well as school closings. A better measure is the four-week moving average of new jobless claims, which smooths out week-to-week fluctuations. That figure dropped last week to 320,500, a decrease of 3,500 from the week before. That decline left the four-week moving average of new claims at its lowest level since early March.

Wal-Mart, whose lower-income shoppers had pulled back in recent months partly because of rising gasoline prices, reported a 4.5 percent increase in same-store sales. The figure was in line with the consensus from analysts polled by Thomson Financial.

The world's largest retailer now expects same-store sales to be up anywhere from 3 percent to 5 percent for July, an encouraging sign given that Wal-Mart has averaged a 2.8 percent pace for the January through May period.

Still, despite June's strong sales gain, Wal-Mart said that its earnings for the second quarter will be in line with forecasts given rising expenses.

Rival Target had a 9 percent gain in same-store sales, beating the 6.9 percent forecast. Total sales rose 16 percent.

Costco Wholesale announced a 9 percent increase in same-store sales in June, beating the 7.6 percent analyst forecast. Total sales rose 12 percent.

But TJX and Family Dollar's results were disappointing. TJX announced a modest 3 percent same-store sales gain, less than the 5.6 percent Wall Street projected. Total sales rose 9 percent.

Family Dollar had a tepid 1.4 percent increase, missing the 2.5 percent estimate. Total sales rose 8.6 percent. Department stores had their best performance since March 2004, according to Niemira.

Penney's same-store sales within its department store business rose 7.4 percent, beating the 4.2 percent analyst forecast. Total sales rose 8.1 percent.

Federated Department Stores, which is acquiring May Department Stores in a deal expected to close in the third quarter, reported a better-than-expected 2.9 percent gain in same-store sales. Analysts forecast a 1.9 percent increase. Total sales rose 3.1 percent.

May eked out a 0.6 percent gain, better than the 1.3 percent decline that analysts had expected. Total sales rose 20.6 percent.

High-end stores continued their winning streak. Nordstrom announced an 8.1 percent gain in same-store sales, better than the 6.6 percent forecast. Total sales rose 9.3 percent. And Neiman Marcus Group enjoyed a 9.2 percent same-store sales gain, surpassing the 6.8 percent estimate. Total sales rose 8.2 percent.

Mall-based apparel retailer Limited Brands posted same-store sales that were unchanged from a year ago. Analysts had expected a 1.6 percent decline. Total sales rose 2.8 percent.

Even Gap, whose sales have been languishing, posted sales that were unchanged from a year ago, better than the 1.7 percent decline that analysts forecast. Total sales rose 3 percent.

Abercrombie & Fitch's same-store sales soared 38 percent, surpassing the 24.2 percent forecast. Total sales rose 52 percent.

Yesterday, teen retailer American Eagle Outfitters announced a 28 percent gain in same-store sales for June, beating the 19.8 percent estimate. Total sales rose 37.3 percent.

Source: eCommerce Times



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