Outside a Gap store in Japan.

Although consumer spending and income showed a slight gain in June, same-store sales for July are not looking good — especially for teen- and specialty-apparel retailers.

Although consumer spending and income showed a slight gain in June, same-store sales for July are not looking good — especially for teen- and specialty-apparel retailers.

Thomson Reuters has the teen retailer segment pegged with a 4.2 percent same-stores sales decline with apparel retailers forecast to post an overall 0.2 percent percent gain, with the segment weighed down by weak total comparable-store sales at Gap Inc. Comps are being released later this week for most retailers, and Gap will release results on Monday.

For Gap, July same-store sales may be the least of its problems. Telsey Advisory Group said in a research note today that it was lowering its price target on Gap to $41 a share from a prior target of $44, “to account for potential earnings risk from markdowns, as fashion is expected to remain off-trend through the remainder of this year at Gap and [Banana Republic], and management’s ability to offset gross margin pressure with [selling, general and administrative] savings becomes more constrained.” During the morning trading session, shares of Gap were down 0.8 percent to $36.20.

Telsey expects July comps at Gap Inc. to be in the range of a 2 percent decline to flat, which compares to a 2 percent gain in the same month last year. “Overall, we expect trends to remain consistent to prior months, with the Gap brand dragging on overall results, [Banana Republic] remaining challenged as it continues to work to find its aesthetic and [Old Navy] continuing to lead the way with on-trend merchandise for the entire family at sharp price points heading into the back-to-school season,” Telsey analysts said.

Regarding consumer income and spending, Chris Christopher, director of consumer economics at IHS Global Insights, said shoppers “took a breather in June after a relatively strong May. In May, gains in consumer spending were broad-based with discretionary spending and autos doing very well. In June, personal spending had the weakest month in the second quarter, but was still above water.”

Christopher said income gains have been “relatively robust, while wage and salary gains were subpar in June and April. Real consumer spending was flat in June after a 0.4 percent increase in May.”

One red flag in the Commerce Department’s Bureau of Labor Statistic report was food price inflation, which showed a 0.3 percent gain in June “after being flat in May and negative in April and March. This is bad news for those households that live paycheck-to-paycheck.”

By way of outlook, Christopher maintains the view that overall consumer spending “for the last half of the year is looking significantly better than the first half. The first quarter was plagued with unseasonably colder winter weather. Consumer spending is likely to increase slightly above the 3 percent mark in the last two quarters of the year, supported by improved job prospects, solid gains in real disposable income, rising household net worth, and a housing market that is gaining traction.”

Telsey analysts also see that “topline momentum can improve in the back-half of the year. Investors will therefore focus on any commentary in July sales reports regarding the initial response to back-to-school trends during the month, ahead of earnings season kicking off in mid-August. Overall, we believe that topline momentum can improve in the back-half of the year from a more sluggish first half. Overall, inventory levels are relatively cleaner than a year ago across the industry (though not necessarily at Gap).”

Telsey analysts assert that consumers are receptive to “product newness” and shoppers who have been shunning apparel and accessories “appears to be slowing to some degree.”

“Boho styling, prints, high-waisted bottoms, and loosening silhouettes are creating newness in assortments, and we believe that some retailers stand ready to benefit from the early signs of an improvement in the denim cycle,” Telsey analysts added. WWD reported last week more flowing volume and flare as a resort trend.

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