Heavy discounts make for mixed results among specialty apparel retailers in July

New York City Deep discounts and hot weather drove shoppers into stores in July, but they remained cautious, resulting in only modest gains for specialty apparel retailers. The sluggish spending raised worries about the health of the important back-to-school season.

July marks the fourth straight month of weak spending after retailers got a surprise bounce earlier in the year amid a rising stock market and government incentives. But confidence is falling as worries grow that the economic recovery is stalling.

July also marks the end of most retailers' fiscal second quarter. However, it is considered the least important month in the quarter because stores use it to clear out summer leftovers and bring in fresh fall merchandise.

Among the hardest hit in July were select teen retailers. The Buckle reported a 9.3% drop in its July same-store sales, bigger drop than the 1% that analysts expected. The Wet Seal posted a 4.3% drop, worse than the 3.4% decline expected.

“Weak traffic trends and a highly promotional environment continue to pressure sales," said Ed Thomas, CEO of Wet Seal, in a statement.

Aeropostale, a strong performer during the recession, reported a 1% increase for July same-store sales, far below the 7.1% increase expected by Wall Street. As a result, it trimmed the top part of its earnings guidance for the second quarter, citing "challenging retail environment [and] a change in consumer shopping behaviors.”

Several chains, however, did better than expected. Limited Brands reported a 12% gain in July same-store sales, more than double what analysts expected. The company raised second-quarter net income guidance. Analysts surveyed by Thomson Reuters, on average, expected a 5.2% gain.

Abercrombie & Fitch also came in better then expected as sales rose 7%. Analysts, on average, had expected same-store sales to rise 4.1%.

Gap also exceeded expectations with a 1% rise in same-store sales. Analysts had expected same-store sales to rise 0.1%. Sales were strongest at Old Navy and Banana Republic. The company’s international stores also did better than expected.

In other same-store sales results for July:

  • Zumiez reported a 9.4% increase, better than analysts expected. The chain boosted its second quarter outlook;
  • American Eagle Outfitters said Thursday that its sales were flat, coming in slightly better than the 0.2% decline that analysts had predicted;
  • Hot Topic projected a bigger-than-expected loss after its sales dropped 9%, worse than the 2.6% drop analysts estimated;
  • At Cato Corp. sales were up 2%; and
  • Ross Stores' sales rose 2% in July, below expectations. Total sales for the month increased 7% to $573 million.