WWD.com/fashion-news/fashion-features/june-apparel-sales-up-as-discounts-abound-725615/
government-trade
government-trade

June Apparel Sales Up As Discounts Abound

WASHINGTON — Retail sales got a boost in June, as retailers turned up the discount volume to clear off shelves for back-to-school merchandise, according to economists.<br><br>Sales at apparel and accessories stores rose a healthy 1.3 percent on a...

WASHINGTON — Retail sales got a boost in June, as retailers turned up the discount volume to clear off shelves for back-to-school merchandise, according to economists.

This story first appeared in the July 16, 2003 issue of WWD.  Subscribe Today.

Sales at apparel and accessories stores rose a healthy 1.3 percent on a seasonally adjusted basis last month to $14.7 billion, according to the Commerce Department’s monthly retail sales report. Compared with June 2002, sales in the sector rose 2.9 percent.

“A lot of this has been driven by heavy price discounting,” said Steve Spiwak, an economist at Retail Forward. “Summer apparel inventories piled up on store shelves, so you are seeing apparel retailers and department stores slash prices to clear inventories to make room for back-to-school merchandise.”

Spiwak said the discounting had a positive impact on a monthly basis, but not on a year-over-year basis. Sales growth slowed against a year ago due primarily to cooler-than-expected weather in June, he said.

Carl Steidtmann, chief economist at Deloitte Research, said a relatively soft spring led to more discounting, though he stressed that inventory levels were not out of line by historical standards.

Department store sales, excluding leased departments, increased slightly by 0.2 percent to $18.05 billion in June, but fell sharply by 5 percent against a year ago.

Sales at general merchandise stores, which includes department stores and discounters, rose 0.3 percent last month to $39.07 billion and increased 2.4 percent against June 2002.

“There is a severe deflation in prices at department stores, which are down 3 percent against a year ago, and that certainly drags down sales,” said Steidtmann. “Department stores are also clearly losing market share to more value-oriented businesses and specialty stores.”

Both economists said newly passed tax cuts should help strengthen consumer confidence in July and August, though rising unemployment could put a damper on spending.

“There are two opposing forces — tax cuts and employment losses,” Spiwak said.

The first element of the recently passed economic stimulus package is a cut in marginal tax rates, which is fattening paychecks, and the second element is a $400 rebate per child for families. He noted the tax breaks could lead to improved b-t-s sales beginning next month.

But the rising unemployment rate, which hit 6.4 percent in June, could offset any boost tax cuts might add to consumer spending, he noted.

“On net, employment losses will offset tax cuts and keep sales sluggish for the next few months,” Spiwak predicted.

All retail sales in June rose 0.5 percent, which was driven by big increases in home improvement, home furnishings, building material and garden sales.

“We are seeing the economy stay the course,” said Spiwak. “There was nothing to give a big boost to spending [in June] and there was nothing, other than the bad employment picture, to make sales fall off any further.”