Escalating job worries and rainy weather dampened shoppers' appetite for buying summer staples like shorts and dresses, resulting in sharp sales declines for many merchants in June and increasing concerns about the back-to-school shopping season.
As retailers reported their monthly figures Thursday, the weakness appeared to cut across all sectors, particularly apparel sellers. Among the biggest disappointments so far were teen merchant Wet Seal Inc., The Children's Place Retail Stores Inc. and Limited Brands Inc., which owns Victoria's Secret.
Even low-priced operator Costco Wholesale Corp. struggled with a same-store sales decline compared with a year ago, when business was helped by stimulus rebate checks.
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 LLC.
"This is not setting up well for the back-to-school season."
Rainy weather across a broad swath of the country was a factor in depressing sales of seasonal goods last month. But shoppers clearly are being discouraged by financial worries.
The latest jobs report from the government, which showed shrinking wages and higher-than-expected job losses last month, is increasing concerns 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 are continuing to seek 70 percent discounts.
Job worries caused consumer confidence, as measured by the nonprofit Conference Board, to drop in June, reversing a three-month upward trend fueled by a stock market rally that also is fizzling.
Costco said Thursday that its June same-store sales dropped 6 percent but managed to meet Wall Street's expectations.
The Issaquah, Wash.-based company said in a recorded message that some of its strongest categories included food and fresh food products, such as deli items, frozen food and candy. It experienced weakness in nonfood, discretionary categories.
But many mall-based apparel merchants fared worse.
Limited Brands struggled with a 12 percent drop in same-store sales last month; analysts surveyed by Thomson Reuters had expected a 7.9 percent decline.
Wet Seal posted an 11.1 percent drop in June, worse than the 9.1 percent decline that Thomson Reuters had expected.
The Children's Place reported a 12 percent same-store sales decline in June; analysts had expected an 8.7 percent decline.
