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Many U.s. Retailers Report Sluggish June Sales

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Americans focused on deeply discounted clothing that they needed in June amid escalating worries about jobs, resulting in sluggish sales for many retailers, according to early reports released Thursday.

June’s lackluster performance is raising concerns about the back-to-school shopping season and the health of the overall recovery.

As merchants reported their results Thursday, the Costco Wholesale Corporation posted a solid revenue gain, but it was fueled by its international business. Many merchants that cater to teenagers, including the Buckle, Hot Topic and Wet Seal reported drops in revenue.

Limited Brands, which owns Victoria’s Secret and Bath and Body Works, was among the bright spots.

The figures are based on revenue at stores open at least a year and are a crucial indicator of retailers’ health.

“My sense is that the consumer is very cautious at this stage given the state of the labor market, the housing market,” said Ken Perkins, president of research firm RetailMetrics. “June sales are going to reflect that caution.”

A sluggish June sets up a “disappointing back-to-school season,” he said, adding that he expected those sales “to be very promotional.”

Stores normally try to clear out summer goods in June to make room for back-to-school merchandise. But analysts say discounting was heavier than expected as stores had to work hard to pull in shoppers.

Clothing stores accelerated discounting toward the end of the month after not getting enough business, said John Morris, an analyst at BMO Capital Markets. He estimated that volume and level of discounts at the mall-based apparel chains he tracked was even with a year ago even as stores carried less inventory. Discounting was down 5 percent in May from a year earlier, after being down 10 percent from February through April, Mr. Morris said.

Uncertainty is growing as evidence mounts — from disappointing housing data to sluggish hiring — that the recovery may be stalling heading into the second half of 2010. And that is when the benefits of most of the government’s stimulus spending will begin to fade.

Costco said Thursday that revenue in stores open at least one year rose 4 percent in June, helped by international results. Analysts surveyed by Thomson Reuters, on average, expected a 4.2 percent gain.

Revenue in stores open at least one year rose 2 percent in the United States and 14 percent internationally.

The discount retailer, Target, said sales were “relatively soft” in June. Revenue in stores open at least one year rose 1.7 percent, which was short of the 2.7 percent increase expected by analysts.

Revenue for the five weeks ended July 4 rose 4 percent to $5.92 billion. Clothing, food, health care and beauty products were strong sellers, Target said, but electronics, video games, music and movies were weaker.

Target said it expected July revenue to rise in the low single digits in stores open at least a year.

Wal-Mart Stores, the world’s largest retailer, stopped reporting monthly results last year.

Among department stores, Macy’s enjoyed a 6.5 percent gain in June, topping analysts’ estimates for a 6.1 percent increase

The Gap, dragged down by weak business at its namesake clothing chain, was flat with last June, when it suffered a 10 percent drop.

“June was a difficult month with lighter traffic than we anticipated,” Gap’s chief financial officer, Sabrina Simmons, said in a statement.

Less competition on the high street and the shops are still seeing sluggish sales.

This recovery is clearly gaining sustainable momentum.

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