June rains, penny pinching dampen retail sales

NEW YORK -- 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.

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.