June rains, penny-pinching dampen retail sales

NEW YORK (Reuters) - June sales fell for most U.S. retailers as the plunging job market and cool, rainy weather dampened interest in summer shopping for consumers, triggering concern about the back-to-school season.

The June results marked 10 straight months of falling sales at stores open at least one year -- the longest losing streak since 2000, Thomson Reuters data showed.

More declines are expected, with the International Council of Shopping Centers forecasting a July same-store sales drop of about 5 percent.

"We continue to have an exceptionally stressed consumer," said Craig Johnson, president of retail research firm Customer Growth Partners. "Almost across the board, there's evidence the green shoots are few, if any, among a very brown field."

The long recession, growing job losses and tight access to credit have made shoppers seek deep discounts and buy only essential items like groceries and toiletries.

But some retailers stuck to their earnings forecasts, and a few even raised outlooks after spending months cutting inventories and costs.

That helped support some stocks. The Standard & Poor's Retail Index was up 0.2 percent on Thursday, while the broader S&P 500 gained 0.6 percent.

June same-store sales fell 4.9 percent overall, according to Thomson Reuters data. More than half of the retailers polled missed expectations, with teen apparel chains and department stores posting the heaviest declines.

Among clothiers, Gap Inc, Limited Brands Inc, American Eagle Outfitters Inc and Abercrombie & Fitch all reported double-digit drops.

In the department store sector, same-store sales were down 8.9 percent at Macy's Inc and 10 percent at the higher-end Nordstrom Inc chain.

Same-store sales fell 6.2 percent for discounter Target Corp, while analysts expected a 5.6 percent decline.

But Target said its quarterly earnings would meet or top Wall Street expectations, and its shares rose 3.5 percent.

Costco Wholesale Corp posted a 6 percent drop in June same-store sales, in line with expectations, on tepid demand for cameras and air conditioners.

Monthly retail sales reports have been a barometer of the overall economy. But Wal-Mart Stores Inc's decision in May to stop disclosing this data has made it tougher to judge the industry's overall performance each month, analysts say.

BACK-TO-SCHOOL FOCUS

June usually marks the onset of summer weather, and demand for items like light clothing, sandals and barbecue equipment.

But this past June was the second-coolest in 10 years, with record rainfall in cities like New York, Boston and Chicago, weather research firm Planalytics said. [ID:nN22518872]

Moreover, the boost retailers got last year from consumers spending their tax rebate checks was absent this year.

But some retailers offered a glimmer of hope.

Both J.C. Penney Co Inc and Ross Stores raised their quarterly earnings outlooks. While same-store sales fell 8.2 percent at Penney, they were up 1 percent at Ross, whose shares hit a 52-week high.

For retailers, the spotlight is now on back-to-school sales, a critical measure of consumers' ability to spend ahead of the holiday season.

Fashion retailer Wet Seal Inc, which posted an 11.1 percent same-store sales drop, will be conservative with inventory ahead of the back-to-school period, it said.

Zumiez Inc, which sells snowboarding gear, said it expected July and August sales to suffer because of a delayed start to the season, a trend that Penney also noted.

While back-to-school shopping entails some basic purchases, consumers are likely to remain frugal and buy fewer items, said Al Ferrara, director of retail practice for accounting and consulting firm BDO Seidman.

That may spell more trouble as gas prices inch up and job losses continue, said Retail Metrics President Ken Perkins.

"It could be a very difficult back-to-school shopping season," Perkins said. "If that's the case, it's going to be a negative harbinger for what we see for the holidays."

(Additional reporting by Jessica Wohl and Ben Klayman in Chicago, Alexandria Sage and Nicole Maestri in San Francisco, Dhanya Skariachan and Vidya Lakshmi in Bangalore; Editing by Lisa Von Ahn)