Warm weather and huge clearance sales helped major US retailers post better-than-expected July sales yesterday, prompting Wal-Mart and others to raise earnings forecasts.
Department stores and speciality chains including Kohl's, J.C. Penney and Gap posted strong sales growth, helping to make up for a disappointing June performance and bolstering hopes for solid back-to-school demand in August.
Wal-Mart, electronics retailer Best Buy, department store operator Federated Department Stores and clothing stores Gap, AnnTaylor and Abercrombie & Fitch all raised their quarterly earnings forecasts.
Wal-Mart and other retailers are due to release second-quarter earnings next week.
Shares of key retailers rose in early trading yesterday, pushing the Standard & Poor's retailing index up 1.6 per cent. Wal-Mart shares rose 1.6 per cent to $56.65.
July is typically a month of clearance sales as retailers make room for back-to-school goods. This year, the markdowns were even more pronounced as US retailers grappled with weak consumer confidence and unemployment near a nine-year high.
Many consumers have put off all but essential purchases, forcing retailers to cut prices, but a long-overdue stretch of warmer weather prompted many consumers to snap up bargain-priced swimsuits and shorts.
Retailers are hoping the $400 (€350) per child tax credits being sent to more than 25 million families will help drive back-to-school sales. Many retailers allow shoppers to cash their tax credit cheques at stores, or use them to pay for purchases.
In a promising sign, leading department store chain Sears, Roebuck said it expects August sales at US stores to be flat with a year ago. That would break a string of 23 consecutive months of declines.
However, Wal-Mart dampened hopes that consumers would quickly spend all the tax credit money. On a recorded update reviewing July sales, Wal-Mart said that consumers on average spent just 15 per cent of the cheques cashed there, down from 25 per cent during the last round of tax cuts.
Wal-Mart, the world's biggest company by revenues, posted a stronger-than-expected 4.6 per cent jump in July sales at US stores opened at least a year. The strong performance broke an eight-month streak of sales at the low end of or below Wal-Mart's expectations.
The retailer raised the possibility last week that sales might beat its forecast for a 2-4 per cent gain after warmer weather helped it make up for weak demand for seasonal goods in May and June.
Wal-Mart also raised its earnings outlook for the just-ended fiscal second quarter.
