Retail sales remain strong
July 8, 1999: 3:34 p.m. ET
Wal-Mart, Kmart post solid June gains as consumer spending continues
NEW YORK (CNNfn) - The American consumer's penchant to spend showed no signs of abating during June as U.S. retailers, led by discount and specialty stores, posted stronger than expected sales growth Thursday.
Aided by the strong U.S. economy, same-store, or comparable, sales -- a key benchmark of growth in the retail industry -- generally outran both May 1999 and June 1998 figures at all ends of the sector.
The Lehman Brothers Same-Store Sales Growth Index posted a 6.8 percent gain in June, compared with 6.1 percent during May and 5.6 percent in June 1998, according to Reuters. Meanwhile the Merrill Lynch retail index, which tracks discount and department store sales, climbed 6.3 percent during June, compared to 5.4 percent during May and 6.4 percent a year ago.
"The consumer in America is just spending and they're spending with abandon," said Steve Kernkraut, retail analyst with Bear, Stearns. "It's very hard to find a pocket . . . where the consumer is not spending."
Wal-Mart, Kmart lead the way
Consumers were clearly spending heavily in the nation's discount chains. Wal-Mart Stores Inc. (WMT), the nation's largest retailer, weighed in with a 6.5 percent increase in June same-store sales, or sales at stores open a year or more. The gain included a 7.0 percent jump in the flagship Wal-Mart chain.
Other major discount retailers registering strong gains included Kmart Corp. (KM), which posted a healthy 9.2 percent jump in same-store sales, and Dayton Hudson Corp. (DH), which recorded a 6.8 percent increase, including a 7.5 percent same-store gain in its flagship Target stores.
"June sales were ahead of plan, reflecting strong performance in hot-weather-related categories such as seasonal apparel, accessories, and specialty items," said Floyd Hall, Kmart's president, chairman and chief executive, in a written statement, indicating the industry's relative health.
A strong economy has kept consumers in the stores
Those gains came despite unseasonably cool weather across the Midwest during the latter half of June, which stifled seasonal sales of fans and air conditioners, said Linda Christianson, a retail analyst with Schroeder & Co.
"Some of the seasonal things probably didn't do so well for that period, but they're already indicating that they are bouncing back in July," she said, indicating even strong July sales figures might lie ahead.
Consumer's growing penchant for discount chains helped slow revenue growth at some large department store chains, but several kept pace. Federated Department Stores Inc. (FD), the parent company of Bloomingdale's, Macy's and other big chains, registered an 8.4 percent gain in same-store sales, as did May Department Stores Co. (MAY).
Other department stores' revenues were more sluggish, however, including Sears, Roebuck & Co. (S), up only 1.9 percent on a comparable-store basis for the month, Dillards Inc. (DDS), up 5 percent, Saks Inc. (SKS), up 4 percent, and J.C. Penney (JCP), down 2.3 percent.
Patrick McCormack, a retail analyst with Deutsche Bank Alex. Brown, said department store sales continue to be pinched by popular discount store chains and higher priced specialty stores, which are flourishing under a strong economy.
"Sears and J.C. Penney are recently caught in the middle with companies like Kohls and Target taking business away from them," MacCormack said.
Indeed, same-store sales at Kohl's Corp. (KSS) soared 15 percent during June, while other discount chains such as Bradlees Inc. (BRAD) posted a 24.8 percent gain.
However, the rise in discount store sales was more than matched by higher priced specialty stores, which for the second consecutive month remained among the most attractive places to shop.
Among those posting double-digit jumps in June same-store sales were popular apparel chain Gap Inc. (GPS), which posted a 13 percent increase. Gap competitor American Eagle Outfitters Inc. (AEOS) was up a healthy 26.3 percent, while Limited Inc. (LTD), up 5 percent and AnnTaylor Stores Corp. (ANN), up 7.7 percent posted strong gains as well.
Outside the clothing sector, Tandy Corp. (TAN), the parent company of electronic retailer Radio Shack, saw same-store sales surge 15 percent, while competitor Circuit City Stores Inc. (CC) registered an 8 percent increase.
Among warehouse stores and wholesale merchants, Costco Co. Inc. (COST) closed the month with an 11 percent same-store sales increase.
One of the few areas of weakness during June seemed to be in the athletic apparel and footwear segment, where several stores posted slower sales.
They included Footstar Inc. (FTS), which posted a 3.8 percent increase in June same-store sales, but said sales in its Footaction stores were down 4.2 percent. Likewise, same-store sales at Sports Authority Inc. (TSA) fell 9.8 percent, causing the company to initiate several cost-cutting initiatives.
J.C. Penney also blamed its sluggish results in part on weaker-than-expected growth in its athletic apparel and footwear sales.
--from staff and wire reports