July could bring retail sales bonanza

NEW YORK (CNNMoney.com) -- Chain store sales jumped 1.1 percent last week, their biggest weekly gain in five months, indicating that the 2007 back-to-school season was off to a stellar start, according to an industry report Tuesday.

According to the joint International Council of Shopping Centers (ICSC)-UBS Weekly U.S. Retail Chain Store Sales Index, the sales gain for the week ending July 28 was the strongest since Feb. 3, when weekly sales rose 1.3 percent.

On a year-over-year basis, sales grew an even better 3.2 percent for the week, the report said.

"Summer clearance, back-to-school shopping and price promotions all factored in to help lift sales for the week," said Michael Niemira, chief economist with ICSC.

That's important for the industry because back-to-school is the second-most important selling period for retailers after the fourth-quarter holiday period.

Some of the nation's largest store chains, including Wal-Mart, Target (Charts, Fortune 500), Gap (Charts, Fortune 500), J.C. Penney (Charts, Fortune 500) and Costco (Charts), are expected to report their July same-store sales numbers next week.

Same-store sales measure sales at merchants' stores open at least a year and are considered to be a key gauge of retail performance.

Wal-Mart, the world's largest retailer, was one of the first out of the gate to slash prices on thousands of school-related items earlier this month. Industry experts said Wal-Mart's aggressive discounts would likely spark a price war among other mass merchant chains.

Sales tracker Thomson Financial, which compares sales at 47 retail chains, estimates that July sales overall rose 2.7 percent, and a much stronger 5.6 percent excluding Wal-Mart's (Charts, Fortune 500) sales.

However, ICSC said it expects that retailers' July same-store sales could increase 3 percent or more based on last week's strength.

Separately, marker research firm comScore said online retail sales (excluding travel) surged 23 percent in the second-quarter versus a year ago to $27.2 billion.

Total online sales, including travel, climbed 19 percent to $47.5 billion during the period, the firm said.

Video games were the top-gaining e-commerce category in the period. The category jumped 159 percent on the strength of Nintendo's Wii and Sony (Charts)'s PlayStation 3 sales.

Sales of sport-related products rose 58 percent, followed by consumer electronics, up 51 percent. Clothing sales rose a moderate 20 percent, the report said.

ComScore estimates that total online spending, including travel, will reach $200 billion in 2007, up from $170.8 billion in 2006.

"Even factoring in the moderate growth rates from the first quarter, we're currently on pace to break $200 billion in e-commerce spending in 2007," Gian Fulgoni, comScore's chairman, said in the report.

"However, in the past we've seen growth rates accelerate as the year progresses, culminating with the online holiday shopping season. So $200 billion may actually turn out to be a conservative estimate," he said.