2nd UPDATE: U.S. Retailers Have a Largely Gloomy June

--June same-store sales prove a mixed bag

--High-end, value retailers do well

--Mid-tier, mass merchants struggle

(Updates throughout with new information)

 
   By Karen Talley 
 

U.S. shoppers showed restraint in June, unless they were snapping up value-oriented merchandise or part of the upper crust.

The lower and middle-markets, defined by department stores and mass merchants, saw a growing trend catch up with them: their customers are turning more frugal.

"There is a dichotomy," among retailers, said Nancy Liu, retail strategist at Kurt Salmon. "If you're middle class, you're not going to spend freely across stores because you're concerned about money. This makes for a more competitive environment for retailers."

June's winners included high-end retailer Nordstrom Inc. (JWN) posting an 8.1% increase in same-store sales when 4.7% was expected. The retailer said the best performing merchandise categories included handbags, fashion and fine jewelry, and women's shoes. The strongest regional performances for full-line stores were in the South and Midwest. Sales results were consistent throughout the month, with the final week the strongest.

Saks Inc. (SKS) reported a 6% rise when 4.7% was projected. The retailer said strongest categories during the month included women's shoes, men's private brand, tailored clothing and shoes, and cosmetics and fragrances.

Off-price retailers also did well and were the only sector to lift guidance expectations, demonstrating the continued propulsion of the frugal consumer. TJX Cos. (TJX) posted a 7% increase in same-store sales, topping expectations of 4.2%, with the company saying customer traffic significantly increased in every division. TJX lifted its second-quarter and full-year outlooks to 52 cents a share to 53 cents a share, and $2.31 a share to $2.39 a share, respectively. Ross Stores Inc. (ROST) reported same-store sales increased 7% in June, beating analysts' expectations of 4.8%. The company raised its second-quarter guidance to 77 cents a share to 78 cents a share amid above-plan sales and gross margin performance in May and June.

Consumers also demonstrated that they will spend for something special. Limited Brands Inc. (LTD) continued its streak, with the operator of Victoria's Secret and Bath & Body Works posting June same-store sales growth of 7%, more than double expectations for a 2.4% gain. The company's Victoria's Secret direct sales segment swung to a comparable store sales gain as other divisions including Bath & Body Works and Limited Brands saw smaller increases than the same period last year.

Otherwise, there were signs of stress, with those that did well helping retailers edge past sales expectations for the month.

The 18 retailers tracked by Thomson Reuters reported a 2.5% gain in June same store sales, the smallest monthly gain in almost three years, and compared with 7.7% growth a year ago. The retailers are up against the most difficult comparison in nearly five years, and edged past expectations for 2.4% growth.

Target Corp. (TGT) reported same-store sales rose 2.1% in June, near the low end of its expected range and below analysts' expectations of 2.4%. Target said it remains on track to meet its second quarter sales and earnings goals. Target said same-store sales were strongest in its food and health and beauty segments, while its home and hardlines divisions saw declines in same-store sales. Regional performance was strongest in the Midwest and West but below company average in parts of the South.

Fellow mass merchant Costco Wholesale Corp. (COST), a barometer of goods ranging from food to apparel, reported U.S. same-store sales excluding fuel rose 3%, when 3.5% was expected. The company said it was hurt by the timing of Independence Day, given last year the holiday fell on the first Monday of the July reporting period and pre-holiday shopping was captured in June. Costco said regions with the strongest sales included the Midwest and Northwest.

Mid-tier department stores had a tough time. Macy's Inc. (M) had a rare miss, with same-store sales rising 1.2%, when 1.9% was expected. The retailer cited a "stagnant at best" macroeconomic environment and sales interruptions because of renovations at its Herald Square store in New York City, the company's biggest.

Rival Kohl's Corp. (KSS) reported a 4.2% drop in comparable-store sales, when a 3.2% decline was projected and said it sees second quarter earnings per share coming in at the low end of its previous guidance of 96 cents a share to $1.02 a share. Chief Executive Kevin Mansell said he was "encouraged" by improved sales in the latter part of the month as the retailer built inventory.

"Macroeconomic issues continue weighing, making the consumer more reluctant to spend," said Ms. Liu. "This is going to give retailers pause for (the) back-to-school selling" period.

--Victoria Stilwell contributed to this article.

Write to Karen Talley at [e-mail]