- The Washington Times - Thursday, August 3, 2006

NEW YORK (AP) — Scorching heat gave the nation’s retailers an unexpected sales bounce in July, but the outlook for the back-to-school season remained muddled, with higher energy prices and interest rates still expected to challenge shoppers in the months ahead.

As retailers reported their sales results yesterday, stores that met or surpassed Wall Street expectations included Wal-Mart Stores Inc., Limited Brands Inc., Nordstrom Inc. and J.C. Penney Co. Inc.

Stragglers included Target Corp., usually a top performer, and Gap Inc., which has struggled to find the right fashion formula for months. The teen sector proved to be a mixed bag; winners included Bebe Stores Inc., while losers included Pacific Sunwear of California Inc.

Overall, though, “things look good. … I feel like the consumer is looking backward and still seeing good times,” said Richard Jaffe, a retail analyst at Stifel Nicolaus, noting that shoppers are still enjoying job security.

The International Council of Shopping Centers-UBS sales tally of 60 stores rose 3.5 percent, above the 2.5 percent estimate. The tally is based on same-store sales, or sales at stores open at least a year. Same-store sales are considered a key measure of a retailer’s health.

July’s results surprised retailers, who have been bracing for a second-half slowdown. Merchants’ anxiety increased in June when same-store sales growth stalled to a 2.6 percent pace. Still, July’s gains fell short of the 3.8 percent pace since February, the beginning of retailers’ fiscal year.

But analysts warned against putting too much weight on the results for July, one of the least important months in the retail calendar and a time when stores are clearing out summer goods to make room for fall merchandise.

Concerns increased about the resilience of the consumer who is faced with a barrage of concerns from a slowing housing market to war in the Middle East that has driven the price of oil higher. Although a solid job market helped lift consumer confidence last month from June levels, a recent batch of reports indicates the economy is showing the effects of shoppers’ financial juggling.

July marked the end of the retail industry’s second quarter, and earnings are expected to be solid overall. Ken Perkins, president of RetailMetrics LLC, a research firm in Swampscott, Mass., forecasts second-quarter earnings growth of almost 11 percent from a year ago, but analysts will be studying comments from executives about consumer spending in the critical second half when they report earnings results starting next week.

Analysts will get a better read on consumers’ financial health this month, when back-to-school shopping starts.

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