WASHINGTON — Heavy discounting and falling gas prices gave consumers a reason to buy clothing in June, boosting retail sales across the board in the apparel specialty store, department store and general merchandise store categories, according to a U.S. Commerce Department report Thursday.
This story first appeared in the July 15, 2011 issue of WWD. Subscribe Today.
June apparel and accessories store sales rose a seasonally adjusted 0.7 percent to $18.8 billion compared with May, while sales at department stores were up 1.4 percent to $15.6 billion. Sales at general merchandise stores, which include discounters and department stores, increased 0.4 percent to $52.4 billion last month. The government report followed better-than-expected comparable-store sales reports from retailers last week.
Compared with a year earlier, specialty store sales gained 6.5 percent, as department stores posted a 0.8 percent sales increase and general merchandise store sales were 4 percent higher. Overall retail sales advanced 0.1 percent after falling 0.1 percent in May, beating economists’ expectations of a slight decline.
Jack Kleinhenz, chief economist at the National Retail Federation, said, “Knowing that shoppers remain concerned about the economy, companies have already begun offering aggressive promotions to entice shoppers.”
Chris G. Christopher, senior principal economist at IHS Global Insight, agreed that retailers were aided by sales promotions in the second half of June.
“Falling gas prices have helped them out, as well,” Christopher said. “But the overall picture on the retail market is very dismal and personal consumption adjusted for inflation does not look good.”
Christopher cautioned that the sales gains may be temporary because he feels consumers overall are not doing well.
“The employment numbers are just terrible,” Christopher said, pointing to the increase in the unemployment rate in June to 9.2 percent. “The stock market and housing prices are not doing well and household net worth will probably take a hit in the second quarter.”
On the other hand, Kevin Regan, senior managing director at FTI Consulting, said: “There seems to be a resilience in retail sales. [The] debt-to-income [ratio] has improved and now consumers are deciding they can do things and enjoy themselves and spend a little more.”
But Regan said the outlook is still clouded, as retailers brace for inflationary pressure on margins from higher cotton prices they paid earlier in the year.
“We know that cotton prices are going to take effect and retailers have already gone on record that pricing will be more difficult,” he said.
While fall merchandise is expected to feel the sting of high cotton prices paid earlier this year to make the apparel, prices for the raw material have moderated in recent months, reflected in the Producer Price Index released by the Labor Department on Thursday. Wholesale prices for U.S.-made apparel rose 0.2 percent in June compared with May and were up 2.6 percent against a year earlier.
“Since their most recent peak in February, raw cotton prices have fallen 14.1 percent,” said Gregory Daco, principal U.S. economist at IHS Global Insight. “That is a substantial decline that is bound to help apparel producers.”