Stock Market Predictions

Chains' deals won over shoppers in June

Stock Market Predictions

The 25 chains tracked in the Thomson Global Markets sales tally reported a 6.5 percent gain in sales at stores open at least a year, beating the 4.9 percent rise that analysts expected.

"It's a good sign that the consumer is feeling good and prepared to spend appropriately," Macy's Inc (M.N) Chief Executive Terry Lundgren told Global Markets.

All but four of the chains reported increases, suggesting retailers by and large are savvier about offering discounts without the panicked price-slashing they resorted to in 2008. The level of discounting showed that retailers are seeking the right strategies as the back-to-school shopping season begins.

"They are very focused on making the right offer to the consumer, in contrast to the uneducated sales we saw during the crisis," said Janet Hoffman, global managing director for Accenture's Retail Practice. "The sales now are much more targeted."

J.C. Penney (JCP.N) was a notable exception, missing estimates and cutting its quarterly earnings forecast after it had to do too much discounting. Its shares fell 1.5 percent.

For a graphic with the sales results, see r.reuters.com/caq52s

BACK-TO-SCHOOL BARGAIN HUNTING

Shoppers have some economic momentum pushing them to open their wallets. Gasoline prices have retreated from recent highs and the job market appears to be improving.

U.S. private employers added far more jobs than expected in June, bouncing back from a surprise slump the month before, a report by a payrolls processor showed.

The International Council of Shopping Centers expects retailers to keep their momentum in July, forecasting a same-store sales jump of 4.5 percent to 5.5 percent.

But many analysts caution against reading too much into the strong numbers from June, since that is when retailers typically cut prices on spring and summer items to make room for back-to-school and fall merchandise.

Stores will probably have to keep offering discounts during back-to-school, which accounts for about one-sixth of total retail sales and is the most important shopping period after the holiday season.

"July is where consumers can pull back and think about where they can get bargains," said David Bassuk, a managing director at consulting firm AlixPartners.

Shoppers said early deals prompted them to spend.

Lizzie Widhelm, a 33-year-old mother of three from Pacific Palisades, California, already has bought uniforms and backpacks. "There were such good early sales," she said.

Only three of 24 chains that Wall Street tracks missed expectations.

The Standard & Poor's Retail Index .RLX rose as much as 2.8 percent to a new high, outpacing the S&P 500's .SPX 1 percent increase. Target Corp (TGT.N) shares rose 7 percent and Hot Topic (HOTT.O) jumped 13 percent, while Dillard's hit an all-time high. Shares of Macy's and Nordstrom reached peaks not seen since late 2007.

DEPARTMENT STORE BATTLE

Macy's Lundgren said the fight was still on for middle-class shoppers.

"All boats are rising in the luxury segment of the business, but I think the middle market is much more of a market share game," Lundgren said.

Macy's, continuing a streak of strong gains, said same-store sales rose 6.7 percent in June, and raised its quarterly sales forecast.

Penney conceded that it had to use more promotions to try to win over its shoppers, who have more modest incomes than patrons of Macy's and are more exposed to the economy's ups and downs.

Penney now expects quarterly same-store sales to rise about 1 to 2 percent, down from its prior forecast of 3 to 4 percent. It forecast quarterly earnings of 6 cents per share, including charges, down from May's outlook of 20 to 24 cents, including about 6 cents in charges.

Penney rivals Kohl's Corp (KSS.N) and Dillard's (DDS.N) fared much better. Kohl's, where same-store sales were up 7.5 percent, has benefited by having exclusive merchandise that accounts for half of its sales. Its shares were up nearly 7 percent.

Macy's got help from its upscale Bloomingdale's chain. High-end department store chains Saks Inc (SKS.N) and Nordstrom Inc (JWN.N) easily beat Wall Street forecasts.

Retailers are starting to raise clothing prices to reflect higher cotton costs. At least at Macy's, shoppers have not pushed back so far, Lundgren said.

(Additional reporting by Jessica Wohl and Eunju Lie in Chicago, Dhanya Skariachan and Martinne Geller in New York, Nivedita Bhattacharjee in Bangalore and Mary Slosson in Los Angeles; Editing by Lisa Von Ahn and Matthew Lewis)