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Retail sales growth steady
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August 6, 1998: 12:07 p.m. ET
Specialty retailers led same-store gains in July; Ann Taylor spurts 23.2%
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NEW YORK (CNNfn) - Cash registers rang at many of the nation's major retailers in July as younger consumers flocked to specialty stores and department store chains, exhibiting a newfound verve, continued to defy earlier predictions of their demise.
While down from their high levels of April and May, when consumers were spending lavishly, same-store sales at some of the largest stores benefited from high consumer confidence, low inflation and a favorable employment climate.
Wal-Mart Stores Inc. (WMT), the nation's largest retailer, said Thursday its same-store sales rose 7.1 percent in the four weeks ended July 31, followed by number-three retailer Kmart (KM), which posted a 5.9 percent same-store sales rise. Wal-Mart shares were up 1-1/4 at 62-1/4 Thursday, while Kmart stock climbed 5/8 to 17-3/8.
Kmart categories showing particular strength in the second quarter, a spokesman said, included apparel, stationery, home appliances and fashions, outdoor sporting goods, health and beauty, consumables, seasonal items and pharmaceuticals.
Among the largest retailers, only a few showed softness, including J.C. Penney (JCP), whose same-store sales slipped 5.7 percent in July; Dillard's, which fell 2 percent; and Talbots Inc., whose sales slackened 7.9 percent. J.C. Penney stock was up 9/16 at 55-1/16 early Thursday.
Women's specialty retailer Ann Taylor Stores Corp. wrapped up some major gains in July, with sales shooting up 23.2 percent as the company overcame earlier problems in some of its fashion lines, indicating the start of a turnaround. The company also said it expects to earn 24 to 27 cents a share in the second quarter, well above Wall Street expectations of 17 cents.
Ann Taylor's once-beleaguered stock (ANN) jumped 1-1/2 points to 23-1/4.
"I think what it shows is that specialty stores in the malls have done a good job reinventing themselves over the last couple of years," said Todd Slater, a retail analyst with Lazard Freres. "A few years ago, the specialty stores were supposed to be dead. I think the Gen X and Gen Y boomlet has benefited the specialty stores that are generally more focused on the younger consumer."
Others credited the sales strength to consumer's willingness to spend money in a still-booming economy.
"Everything really seems to be working for the consumers," said Kurt Barnard, a retail analyst with Barnard's Retail Trend Report.
Lazard Freres' Retail Comparable-Store Index of 49 companies was up 5.8 percent in July, a 0.1 percent rise from its June rate of 5.7 percent. Slater attributed the rise to "good consistency" across the retail sector.
The major glitch in the monthly reports was high-quality apparel maker Gymboree Corp. whose same-store sales slumped a dramatic 31 percent as the store ran into problems managing its inventory flow. Nonetheless, Gymboree's (GYMB) stock was up 1-1/16 at 10 in midmorning trading Thursday.
Dana Telsey, an analyst with Bea Stearns credited the solid sales growth to "better quality products at good prices and new merchants having an impact on the product." Barnard, however, noted that consumers seemed to soft pedal a little more when it came to buying high-end luxury items.
Among other July gainers: Federated Dept. stores, which runs more than 400 retail stores and 150 specialty shops under such names as Bloomingdale's, The Bon Marche, Burdines, and Macy's, reported sales growth of 3.9 percent. Federated stock was off 1/8 at 50-1/8 Thursday.
Shares of Saks Holdings Inc., owner of Saks Fifth Avenue, which posted a 9.9 gain, were up 1-1/4 at 27-1/4. Sales at The Limited Inc., grew 7 percent; but the company's stock was down 1/16 at 26-7/16 Thursday. 
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