Kohl's beat expectations, but most retailers are hurting

Industrywide, shoppers remained tight-fisted in July, resulting in sluggish sales for many merchants and raising concern about the back-to-school shopping season's health.

Menomonee Falls-based Kohl's raised its earnings guidance for the second quarter after sales in July were better than expected.

The department store chain reported a 0.4 percent increase in same-store sales for the four weeks ended Aug. 1, better than the 4.3 percent decline that analysts reporting to Retail Metrics had expected.

As a result, Kohl's now expects earnings in the range of 73 cents to 74 cents for the quarter, up from earlier guidance calling for earnings of 56 cents to 64 cents. The average estimate from analysts for the quarter is 67 cents.

In a statement, Chief Executive Officer Kevin Mansell said sales were strongest in the Southwest, with a same-store increase in double digits for stores in that region. Kohl's has benefited from the closing of the Mervyns chain, a California-based competitor.

Nationwide, mall-based chains continue to be hit hardest as consumers focus on necessities. Among the disappointments were Macy's Inc. and teen retailers Abercrombie & Fitch Co. and Wet Seal Inc.

Among the few bright spots was discounter TJX Cos., operator of the T.J. Maxx and Marshalls chains, which reported a sales gain that exceeded Wall Street estimates.

"The consumer is stressed and depressed," said Ken Perkins, president of retail consulting firm Retail Metrics. "Back-to-school shopping season is going to be very late."

The International Council of Shopping Centers-Goldman Sachs retail sales tally fell 5.0 percent in July compared with the year-ago period. July's pace was in line with the 5.1 percent drop in June and worse than the 4.5 percent decline averaged since February, the beginning of retailers' fiscal calendar. Michael Niemira, ICSC's chief economist, estimates that the anticipation of tax holidays in many states this month depressed July's results by 0.5 percentage points and will boost August's sales figures by the same amount.

Same-store sales are sales at stores open at least a year and are considered a key indicator of a retailer's health.

July's decline marks the 11th consecutive monthly drop when excluding Wal-Mart results -- which had buoyed the industry in the spring before it stopped reporting monthly numbers.

As club operator Costco Wholesale Inc. reported Thursday that its same-store sales dropped 7 percent in July, pressured by lower gas prices and the stronger dollar, the retailer said some of its strongest categories were food, including deli, candy and frozen food.

It reported weakness in non-food, discretionary categories but did note a slight improvement in some areas such as office, sporting goods, small appliances and men's and women's apparel.

Target Corp., which has been stumbling because of its reliance on nonessentials such as trendy jeans, posted a 6.5 percent drop, worse than the 5.8 percent decline analysts had expected.

TJX's 4 percent gain beat Wall Street's expectations for a 2.3 percent increase. It also raised its second-quarter profit outlook.

Among department stores, Macy's reported a 10.7 percent drop in same-store sales, worse than the 9.1 percent drop that was expected. J.C. Penney's 12.3 percent same-store sales decrease was a bit steeper than the 11.4 percent decline that analysts had expected. But Penney raised its earnings outlook.

Among teen retailers, Abercrombie & Fitch posted a 28 percent same-store sales decline, worse than the 26.9 percent drop that analysts expected. Wet Seal reported a 12.1 percent drop, worse than the 10 percent decline that analysts expected.

The Associated Press contributed to this report.

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