By Anne D'Innocenzio, AP Retail Writer
NEW YORK (AP) — Deep discounts on summer leftovers and hot weather drove shoppers into malls in July, but they remained choosy, resulting in only modest gains.
The sluggish spending raises worries about the health of the back-to-school season as Americans step up saving amid a stalling economic recovery. Already, retailers like teen specialists Abercrombie & Fitch Co. and American Eagle Outfitters Inc. are offering generous discounts on new jeans.
As stores reported their results Thursday, there were some clear winners. Costco Wholesale Corp. and Limited Brands Inc. had robust gains. Macy's Inc. posted a strong increase, and the CEO said that the back-to-school business was off to a "great" start, helped by its newly launched Material Girl fashion collection created by pop star Madonna and her 13-year-old daughter, Lourdes.
But those figures are being compared with dismal spending in July 2009.
Teen merchants were among the hardest hit, with The Buckle Inc. and The Wet Seal Inc. suffering declines.
The figures are based on revenue at stores opened at least a year and are considered a key indicator of a retailers' health.
"People were out there, but retailers were much more promotional," said Ken Perkins, president of research firm RetailMetrics. "This doesn't bode well for back-to-school. It's going to be late, and stores are going to have to be very promotional all the way through."
He added that consumers, particularly in the low- to middle-income brackets, are in a "buy now, wear now" mode because they don't have a lot of discretionary income.
July marks the fourth straight month of weak spending after retailers got a surprise bounce earlier in the year amid a rising stock market and government incentives. But confidence is falling as worries grow that the economic recovery is stalling. An unemployment rate that's still stuck at almost 10% and tight credit are making shoppers focus on saving more and being picky about what they buy.