Escalating job worries and rainy weather dampened shoppers' appetites for buying summer staples like shorts and dresses, resulting in sharper-than-expected sales declines for many merchants in June and increasing concern about the back-to-school shopping season.
As retailers reported their monthly figures Thursday, the weakness cut across all sectors but hit mall-based clothing stores particularly hard.
Even low-priced Costco Wholesale saw a same-store sales decline compared with June last year, when stimulus rebate checks helped business. Wal-Mart Stores no longer reports same-store sales each month. Among the few bright spots was TJX tjx, which sells name-brand clothes and home furnishings at a discount.
Same-store sales — sales at stores open at least a year — are considered a key indicator of a retailer's health.
"Consumers are under severe pressure on the job front, so discretionary spending is just not happening, "said Ken Perkins, president of retail consulting firm Retail Metrics.
"This is not setting up well for the back-to-school season."
Many areas from the West Coast to the Northeast received two or three times their normal June rain last month, according to National Oceanic and Atmospheric Administration's National Climatic Data Center.
But financial worries are clearly discouraging shoppers, too. The latest federal jobs report, which showed wages shrinking and higher job losses than expected in June, is increasing concern about consumers' ability to spend in the months ahead.
Merchants are relying more now on shoppers' paychecks to fuel purchases because consumers' two other key sources of funding — credit cards and home equity loans — have shrunk. But, seeing their earnings dwindle, shoppers continue to seek big discounts.
Job worries caused consumer confidence, as measured by the non-profit Conference Board, to drop in June, reversing a three-month upward trend fueled by a stock market rally that also is fizzling.
Among the biggest disappointments in Thursday's same-store sales reports were teen stalwart Abercrombie & Fitch anf, The Children's Place and Limited Brands, which owns Victoria's Secret.
Wal-Martwwt, the world's largest retailer, has benefited from the recession as shoppers look for deals and focus on necessities. The company stopped releasing monthly data after its April report.
Discounter Target, which has been stumbling because of its reliance on non-essentials like trendy jeans and towels, reported a 6.2% decline in same-store sales for June. Analysts surveyed by Thomson Reuters expected a 5.6% drop.
But Target expects to meet or exceed analyst expectations for second-quarter profit due in part to cost controls.
Costco cost said Thursday that its June same-store sales dropped 6%, meeting Wall Street's expectations. The company said in a recorded message that some of its strongest categories included food, such as deli items, frozen food and candy. It experienced weakness in nonfood, discretionary categories.
TJX, which operates T.J. Maxx and HomeGoods, reported a 4% gain in same-store sales, exceeding analysts' average forecast of a 0.6% decline. Based on better-than-expected sales, TJX raised its second-quarter earnings outlook.
Among department stores, J.C. Penney posted an 8.2% drop in same-store sales but beat Wall Street's estimate of a 9.3% decline. The chain also narrowed its loss estimate for the second quarter.