New York Stores deepened discounts more than planned in June to draw recession-scarred shoppers to buy summer tops and other merchandise. But shoppers bought mostly items they needed, resulting in small revenue gains.
The mixed results from June, released Thursday, are raising concerns about the back-to-school season and consumers’ ability and willingness to hit the accelerator on spending.
The International Council of Shopping Centers’ index of June retail sales rose 3 percent, the low end of its growth forecast that ranged from 3 to 4 percent. But that’s compared with a 5.1 percent decline in June 2009.
The figures are based on revenue at stores open at least a year and are a key indicator of retailers’ health.
The third straight month of modest sales gains after a surprisingly solid start to the year underscores the choppiness of the economic recovery and puts more pressure on retailers to come up with innovative tactics to get shoppers to spend in the critical months ahead, instead of just resorting to price slashing.
Already, office supplier Staples Inc. is pushing penny deals, and teen merchant American Eagle Outfitters Inc. is promoting another gimmick starting later this month — anyone who tries on a pair of jeans will get a free smart phone.
“I think the competition is going to be intense,” said Sherif Mityas, a partner in the retail practice at management consultant A.T. Kearney. “The economy is recovering in fits and starts.”
Back-to-school merchandise starts flowing into stores next week; it accounts for almost 40 percent of total retail revenue from July through September, Michael P. Niemira, ICSC’s chief economist, estimates.
Merchants’ come-ons are great news for deal seekers — if they have the means to spend.
Lee Ballas lost her job two years ago when Ford Motor Co. laid off thousands of workers. Today, she’s still looking for a job and estimates she’s cut her shopping budget by half.
The 55-year-old from Grosse Ile, Mich., said she plans to spend about $200 this year to get her two grandchildren — ages 7 and 11 — ready to go back to school. That’s 60 percent less than in previous years.
On the chopping block? Clothing and gadgets.
“I’m cutting back,” she said. “I’ll buy less clothing, and I probably won’t get them the latest and greatest tech thing.”
June’s results, which cover the period from May 30 through Saturday, were inflated by a late Memorial Day weekend, which lifted results by 1 percentage point last month and deflated May by the same amount, according to Niemira.
After ramping up spending surprisingly in the first quarter, shoppers have hunkered down since April, going out to stores only to buy necessities. The volatile economic environment has made business uneven from week to week, and economists don’t see that changing until American businesses start making significant hiring.
Uncertainty is growing as evidence mounts — from disappointing housing data to sluggish hiring — that the recovery is stalling heading into the second half of 2010. And that is when the benefits of most of the government’s stimulus spending will begin to fade.