No Goods — No Good

It was not much of a surprise that Gap Inc. (San Francisco) reported a disappointing same-store sales decline in July. More surprising was the news from Wal-Mart (Bentonville, Ark.) and Target (Minneapolis) that same-store sales were below Wall Street expectations or their own.

In nearly all cases, retailers pointed to consumer skittishness and lean inventories.

Even given low mid-summer expectations, when stores typically clear out their spring and summer leftovers, July sales were affected by stronger-than-expected June performances. With retailers maintaining lean inventories anyway, the generally solid June left fewer goods to move out in July.

Target said its same-store sales were in line with Wall Street expectations, but were below company forecasts. TJX Cos. (Framingham, Mass.)also announced that July same-store sales were below Wall Street expectations.

Department stores and mall-based apparel stores again suffered, particularly Federated Department Stores Inc. (Cincinnati) and May Department Stores Inc. (St. Louis).

At Sears, Roebuck & Co. (Hoffman Estates, Ill.), same-store domestic sales fell 4.9 percent, which was in line with Wall Street's estimates. J.C. Penney Co. (Plano, Texas) posted a 2.2 percent decline in same-store sales in its department store division, slightly better than the 2.9 percent decline that Wall Street anticipated. Sales were weak in July because of low inventory levels, but the company said that inventories are back to appropriate levels for the back-to-school season.

“The good news is that retailers had good profit margins,” said analyst Richard Jaffe of UBS Warburg Securities, “but the bad news is that they gave up a lot of the top line.” He estimated that retailers ended July with 10 percent to 15 percent less inventory than the year-ago period.