Retail sales stir back-to-school shopping hope

NEW YORK (Reuters) - Retailers, including industry leader Wal-Mart Stores Inc. (WMT.N), reported June sales that topped Wall Street's lowered expectations on Thursday, raising hope for the back-to-school shopping season.

Wal-Mart, the world's largest retailer, posted a stronger-than-expected 2.4 percent gain in its June sales at its U.S. stores open at least a year and said its previous forecast for higher second-quarter earnings is "attainable."

In June, sales at 50 U.S. retailers rose a combined 2.4 percent, according to a tally by the International Council of Shopping Centers. The results beat its most recent forecast of a 1.5 to 2 percent rise, but trailed last June's advance of 3 percent.

"While they were by no means stellar results this month, they certainly were better than the gloom that was expected," said Ken Perkins, president of retail tracking firm Retail Metrics Inc., of the monthly sales figures.

The Standard & Poor's Retail Index .RLX rose 1.4 percent in afternoon trading.

Retail sales have been trending lower this year as weakness in the housing market ripples through the economy and high fuel prices take a larger bite out of shoppers' wallets, and retailers have struggled to convince shoppers to splurge amid of dearth of "must-have" fashion items.

The trend has raised concerns about whether the strength of consumer spending, which accounts for roughly two-thirds of national economic activity, will hold up.

That concern was magnified earlier this week when Sears Holdings Corp. (SHLD.O) and Home Depot Inc. (HD.N), the largest U.S. home improvement chain, issued profit warnings, prompting worries that June sales figures would be dismal.

The final June sales results may have beat diminished expectations, but there were notes of caution, with Wal-Mart saying that gas prices are a top concern for shoppers.

"Consumers continue to be challenged financially, with more pressure on discretionary spending," Eduardo Castro-Wright, Wal-Mart Stores U.S. president and chief executive, said in a statement.

LOOKING FOR A BARGAIN

With gasoline prices remaining high, Craig Johnson, president of retail consulting firm Customer Growth Partners, said consumers are concentrating on "commuter shopping" -- doing their shopping on the way to and from work, eliminating extra trips to the mall.

That was evident in the June sales results, with discount retailers and warehouse clubs posting strong results, but certain mall-based retailers, like department stores and some specialty apparel stores, foundering.

Wal-Mart's U.S. June same-store sales rose 2.4 percent -- topping an average forecast of 0.9 percent among analysts polled by Reuters. The company had forecast sales would be flat to up 2 percent.

June same-store sales at its namesake U.S. stores rose 1.6 percent, while sales at its Sam's Club warehouse division jumped 6.9 percent.

Costco Wholesale Corp. (COST.O), the No. 1 U.S. warehouse operator, and BJ's Wholesale Club Inc. (BJ.N), the No. 3 warehouse operator behind Sam's Club, also posted June results that beat analysts' view.

But women's apparel retailer AnnTaylor Stores Corp. (ANN.N) reported a larger-than-expected 8.4 percent fall in June same-store sales, citing slow customer traffic and continued weakness at its LOFT chain.

Department store operator Macy's Inc. (M.N) also struggled, reporting a bigger-than-expected 2.7 percent decline in June same-store sales, and it cut its quarterly profit outlook.

Also posting disappointing sales was clothing retailer Gap Inc. (GPS.N) and department store operator Bon-Ton Stores

(BONT.O).

BAD NEWS, KIDS ... BACK-TO-SCHOOL LOOMS

In June, retailers typically mark down items to clear their stores of summer merchandise and get ready for the back-to-school shopping season.

The sales attracted teenagers looking for bargains in June, with all teen apparel retailers followed by Retail Metrics reporting sales that exceeded forecasts except for Aeropostale Inc. (ARO.N) and Children's Place (PLCE.O).

"Given the relative strength of teen's June performance, this should bode well for retailers heading into the very important upcoming back-to-school selling season," Perkins said in a note.

Michael Niemira, chief economist of the International Council of Shopping Centers, said June's sales increase of 2.4 percent trailed year ago results but was in line with advances retailers have been posting this fiscal year.

That means the "soft patch" retailers have faced since February does not appear to be deepening ahead of the back-to-school season, he said.

"That's the silver lining," he said.

Wal-Mart rival Target Corp. (TGT.N) said its June same-store sales rose 3.3 percent, toward the low end of its forecast for a gain of 3 to 5 percent.

But for July, when the back-to-school selling season starts, it forecast same-store sales growth of 5 to 7 percent. Its same-store sales rose 3.1 percent last July.

Wal-Mart had a more mild outlook, forecasting U.S. July same-store sales would rise just 1 to 2 percent.

The company said its second-quarter earnings forecast of 75 to 79 cents per share from continuing operations is "attainable." Analysts, on average, expect 77 cents per share, according to Reuters Estimates.