Weather a boost to July retail sales

Joan Verdon / The Record of Bergen County

A record-breaking run of hot weather heated up retail sales in July, but analysts and Wall Street are worrying that the country’s economic woes could have a chilling effect on future sales.

Sales at retailers that report monthly results rose 4.6 percent, according to the tally by the International Council of Shopping Centers, which includes results from 27 national chains. The results measure the difference in sales between July 2010 and last month.

July was the seventh consecutive month in which retailers posted a better-than-expected average increase, and the 23rd consecutive month when sales increased, according to research firm, Retail Metrics Inc.

Analysts said the hot weather drove shoppers into air-conditioned malls and stores and spurred sales of summer clearance items.

While retailers like Macy’s and Target hailed their solid results in July as a sign that their back-to-school season is off to a good start, analysts weren’t as optimistic.

Back-to-school total sales, as opposed to the monthly comparisons, “will be flat to slightly declining, and that’s just because of the uncertainty of the economy,” said Jeff Green, president and CEO of Jeff Green Partners. While he noted that analysts predicted that last year, and consumers surprised them, “last year it felt like we were starting to climb out of the recession,” he said. “The last couple days all we hear is about the possibility of the double dip.”

“Fear is starting to become a little more rampant among consumers, and I think they’re just going to hold tight,” Green said.

July’s results were weaker than the average 6.9 percent gain reported in June by the International Council of Shopping Centers, but up significantly the 2.8 percent gain in July 2010.

“Most interesting in these numbers is that many retailers are reporting decent gains in apparel sales, which is a discretionary category that is often the first to suffer from the economic strains on shoppers’ confidence,” said Frank Badillo, Senior Economist of Kantar Retail, in a report.

Badillo said lower-income shoppers will be forced to cut back discretionary spending the most, as they cope with high gas prices and other economic pressures.

Target CEO Greg Steinhafel, in a statement, called his company’s 4.1 percent sales gain a sign that “back-to-school sales are off to a sold start,” and said Thursday results bolstered “our confidence in the strategies we have in place and our ability to execute them, especially as we head into the 2011 holiday season.”

Retail Metrics analyst Ken Perkins, in a report on the July results, predicted that the back-to-school selling season will “be good, but occur late as cash-strapped consumers look for deals and remain selective.” Back-to-school is the second biggest selling period of the retail year, after the holiday season, and is considered an important lead-in to holiday sales.