July sales struggle as tax rebate cash ends
Written on August 8, 2008
Retailers including Wal-Mart Stores Inc and Target Corp posted disappointing July sales results on Thursday as shoppers ran out of extra tax rebate cash, dampening hopes for the current back-to-school shopping season.
The sales results, along with cautious outlooks for August, left little hope for any lasting boost from tax rebate checks to prop up consumers headed into the back half of the year and an all-important December holiday season.
“The stimulus (checks) really had a marginal effect at best and it has run its course and there’s no carry-through,” said Retail Metrics President Ken Perkins. “It’s difficult to see where some sort of boost in spending is going to come from.”
Wal-Mart, the world’s largest retailer, said its July sales at U.S. stores open at least a year, or same-store sales, rose 3 percent, missing Wall Street expectations for a gain of 3.4 percent. Target’s same-store sales fell 1.2 percent, while Wall Street had forecast a decline of 0.3 percent.
“With the end of the stimulus checks, we know consumers are spending more cautiously, and we continue to see a pronounced paycheck cycle at the end of the month,” said Eduardo Castro-Wright, head of Wal-Mart’s U.S quick payday loan. operations.
Shares of Wal-Mart fell 3.3 percent in early trading, while Target fell nearly 3 percent. The Standard & Poor’s Retail Index fell 1.7 percent.
The back-to-school shopping season, the second most important season of the year for U.S. retailers behind the December holidays, is now under way. But in a sign that consumers continue to spend warily, both Wal-Mart and Target issued cautious forecast for August.
“We still see sales volatility from week to week, especially around paycheck cycles,” Tom Schoewe, Wal-Mart’s chief financial officer, said in a statement.
Filed in: economics.