Stimulus checks, back to school to aid retailers' July

NEW YORK (MarketWatch) -- Retailers' sales are expected to continue to get some lift in July from the last batch of the U.S. government's stimulus checks was mailed and back-to-school purchases increased by aggressive promotions.

U.S. retailers' sales at stores open at least a year in July are expected to rise 2.2%, its fourth straight monthly gain when companies report Thursday, according to a survey of analysts by Thomson Reuters. The gain, pales against a 2.9% growth rate a year earlier as the U.S. economy softened the past year.

Same-store sales are a key retail performance benchmark, because they exclude sales from new and recently closed locations.

The U.S. government's $100 billion-plus in stimulus checks have helped sales in the past three months. Demand also was lifted by clearance sales and other promotions; tax-free holidays in states such as Virginia; and by warmer weather that lifted demand for such items as T-shirts and shorts.

Still, while sales are expected to see a lift, analysts said concerns linger regarding the outlook for the rest of the year, especially after back-to-school shopping is completed in September. Gasoline prices have pulled back, but still are near a record high level that's changed U.S. consumers' shopping patterns and led them to reduce trips to malls and consolidate purchases in one-stop trips.

"Back-to-school happens every year and parents are budgeted for it," said Jharonne Martis, an analyst at Thomson Reuters. "After August there is no back-to-school or rebate checks to boost consumer spending. We will see then how robust the U.S. consumer can be."

Value-oriented retailers in their respective segments, from discounter Wal-Mart Stores Inc. and wholesale club Costco Wholesale Corp. to off-price retailer Ross Stores Inc. and teen retailer Aeropostale Inc. are expected to outperform in their respective segments, analysts said.

Department stores and specialty apparel retailers that sell more discretionary merchandise will continue to be laggards as penny-pinched consumers cut back on clothing and accessories purchases in the face of rising food costs and other economic malaise, analysts said.

While retailers market graphic prints and skinny jeans to excite shoppers, the apparel retailers in general have suffered from lack of a major must-have fashion item, analysts said. To spur shoppers, retailers such as J.C. Penney Co. launched exclusives with designer tie-ups such as Kimora Lee Simmons' Fabulosity. They also have touted value, started their back-to-school season earlier or signed special partnerships on a nationwide scale to draw demand.

"It's a tale of two retail worlds, Wal-Mart and everyone else," said Michael Niemira, chief economist of International Council of Shopping Centers. "Everyone else' is still struggling with the economic environment." Wal-Mart, with its "Save Money. Live Better" tagline, has outperformed its chief discount rival Target Corp. It in July raised its profit forecast after reporting better than June sales at both its namesake and Sam's Club chains. While Wal-Mart expects July sales to rise between 2% and 4%, Target sees its July sales in the range of minus 1% to plus 1%.

While discounters and wholesale clubs are expected to fare better, they also are not excluded from the dilemma retailers face of whether to raise prices to offset rising costs or risk losing market share. Costco, which has been a beneficiary of shoppers making one-stop trips to purchase bulk items at lower prices, in late July warned that its fourth-quarter profit would miss analysts' estimates, hurt by its strategy to hold prices in check to lure shoppers in the face of rising energy and other commodity costs.

Source: MarketWatch.com

Aeropostale plans to add stores, new concept

NEW YORK - Teen retailer Aeropostale Inc. plans to reach 1,000 stores in the U.S. over the next several years and is also developing a new, undisclosed store concept, Chief Executive Julian Geiger said Wednesday.

Geiger spoke at the Piper Jaffray (nyse: PJC - news - people ) consumer conference in New York, which is being webcast.

He said the New York-based company, which operated 814 stores at the end of last year, could grow to 1,000 with a "couple years' growth." About 85 stores are expected to open this year.
Aeropostale (nyse: ARO - news - people ) also plans for about 100 stores in Canada eventually. The company now has about 27.

The plan is an "aggressive and well controlled store-opening program," Geiger said.

Aeropostale has in large part outperformed its teen-apparel rivals in recent months amid a difficult retail environment. Last week the company said sales in stores open at least one year, a key retail metric known as same-store sales, rose 6 percent in May, as teens reacted positively to summer merchandise.

Geiger also added that he does not expect product-cost inflation to influence results in 2008, but expects some sourcing pressure in 2009, as companies Aeropostale uses to make its clothes raise prices because of inflation.

However, Geiger said because Aeropostale is such a big client for the companies that make its clothes, "increases will be later than and smaller than competitors."

Geiger did not offer any details about the new store concept it is planning but said that if Aeropostale growth slows in the future, the new store concept, along with the company's Jimmy'Z clothing store line, could pick up the slack.

Aeropostale shares fell 49 cents to $32.94 during afternoon trading.

Source: Forbes.com