Retailers' July Sales a Mixed Bag

U.S. discounters and department stores reported strong July sales on Thursday, but clothing stores suffered from a slow start to the back-to-school shopping season.

Wal-Mart Stores Inc. (WMT), the world's largest retailer, said sales at stores open at least a year rose 1.9 percent in July after it cut prices on back-to-school items to drive shoppers into its stores. The increase was better than analysts had expected and toward the top end of the company's forecast.

Wal-Mart said it was encouraged by positive early signs in its back-to-school categories but that the apparel and home businesses continued to be soft and are expected to remain so through the third quarter.

Analysts did not have high hopes for apparel retailers in July, due to very hot weather in some areas and the increasing tendency of some shoppers to time their purchases with tax holidays or wait until school starts to see what other kids are wearing first.

However department stores, especially those like Nordstrom Inc. and SaksInc. Inc., which cater to high-end shoppers, continued to shine, showing that luxury consumers are not pulling back.

Retail sales have been trending lower this year as weakness in the housing market ripples through the economy and high fuel prices require more of shoppers' budgets. Markets have been hammered in recent weeks amid concerns over subprime mortgages, anemic U.S. jobs growth and uneven corporate earnings reports.

The trend has raised concerns about whether the strength of consumer spending, which accounts for about two-thirds of U.S. economic activity, will hold up.

An extra week on last year's retail calendar created monthly periods this year not exactly comparable to year-ago results.

Discounters that sell general merchandise, including Target Corp. and Costco Wholesale Corp., reported July sales that were better than analysts expected, with Costco citing strong sales of televisions, digital cameras and the latest Harry Potter book release.

By contrast apparel retailers such as Chico's FAS Inc. , Pacific Sunwear of California Inc., Gap Inc.

and Talbots Inc. posted weaker-than-expected results.

Saks July sales rose 14.9 percent in July, beating the 10.6 percent rise analysts were expecting, helped by men's apparel, accessories and designer sportswear. Nordstrom's sales rose 9.4 percent, more than double analysts' average estimate.