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June Retail Sales: Discounting Deceives

(Retail Sales article updated with new information on Gap and Buckle sales results for June.)

NEW YORK ( TheStreet) -- Retail same-store sales results for June revealed some unexpected pockets of strength, but showed consumers are still far from returning to full-price buying.

Retailers are facing pressures on nearly every front and are likely to feel the strain for months to come. June sales results showed consumers were willing to spend, but only when discounts were at their steepest in the last weeks of the month. Consumers remain skeptical about the strength of the economy and are expected to remain frugal when it comes to spending.

The added left hook for brands and retailers comes from rising costs for everything from raw materials to labor in key sourcing countries like China. They'll have little luck passing those costs on to consumers, and will instead see their margins erode even further.

Teen retailers such as Abercrombie & Fitch (ANF - Get Report), Aeropostale (AEO - Get Report) and Zumiez (ZUMZ - Get Report) bested estimates thanks to discounting throughout the month.

Losers in the specialty retail segment were Gap (GPS - Get Report), which missed estimates of a 3% gain by posting flat comps, and Buckle (BKE - Get Report), which plunged 7.3%.

The heavy promotional environment also lifted major department store players such as Macy's (M - Get Report) and Nordstrom (JWN - Get Report).

June is traditionally a slow month for retailers as they look to clear inventory and prepare for the crucial fall selling season. Given the shaky economic environment, retail analysts expected June sales to be particularly weak.

"This is a pattern that we've seen for at least 12 years, so there is no need to panic," said Marshal Cohen, chief industry analyst with market research firm The NPD Group. "In general we have seen retail getting better and while we are up against some pretty bad numbers from last year, I think we will see some very clear signs that a recovery is underway."
Same-Store Sales Table

While there were some positives to be drawn from results, the majority of analysts saw results as mixed, and believe signs of a recovery are further on the horizon.
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AEO $14.50 -0.82%
ANF $26.53 -2.50%
BKE $28.80 -0.38%
ZUMZ $16.15 -3.06%
GPS $22.63 -1.52%


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