Retailers get break as July reports show strong sales

NEW YORK -- Retailers finally got a break in July as warm weather and heavy discounting helped lift sales above expectations for many merchants, even the struggling department store sector.

As retailers reported their sales results Thursday, all industry segments appeared to benefit from an improved selling environment. Wal-Mart Stores, the industry leader, boosted its profit outlook for the second quarter.

J.C. Penney, Kohl's and Gap Inc. were among the retailers that reported sales that beat analysts' forecasts.

Even May Department Stores, which has struggled with sales declines, eked out a solid increase in sales at stores open at least a year. Sales at stores open at least a year, known as same-store sales, are considered the best indicator of a retailer's health.

Good omen

"It was a good month, and it may be a good omen for the second half," said Michael P. Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd. "Sure, the month was promotional and weather helped, but this could be the start of a much better trend."

His company's same-store sales of 77 retailers was up 4.3 percent, well above the 3 percent gain Niemira had expected. That compares with a 2.6 percent increase in the year-ago period

The pace is well above the sluggish 1.5 percent increase that had been seen for most of the past year, although the last two months' same-store sales improved slightly, averaging a 2.2 percent gain.

July -- when retailers step up discounting to get rid of summer items -- is one of the least important months in a retail sales calendar. Analysts are now closely monitoring August and September, which account for the critical back to school season.

Wal-Mart, which along with other retailers struggled with cooler than normal temperatures in May and June, said same-store sales were up 4.6 percent, well past the 3.7 percent increase predicted by analysts surveyed by Thomson First Call. Total sales were up 11.9 percent, driven by food, electronics, swimwear and pet supplies.

May said its same-store sales rose 1.8 percent, while its total sales were up 4.5 percent. But Federated Department Stores did not fare as well, reporting same-store sales that decreased 0.4 percent and total sales that slipped 0.5 percent.