U.S. Consumers Dropping The Shopping

U.S. retailers felt the squeeze of penny-pinching consumers in July. On Thursday, U.S. retailers reported disappointing July sales as cash-strapped consumers cut back on spending and the impact of government stimulus checks dwindled. Same-store sales for bellwether Wal-Mart Stores, (nyse: WMT - news - people ) which had performed surprisingly well in recent months, grew just 3.0%, below the 3.4% analysts had expected. The more upscale Target (nyse: TGT - news - people ) said July same-store sales fell 1.2%, which was also worse than expectations, in this case a 0.3% decline. The Minneapolis-based company, which has been posting soft numbers of late, said it expects an August decline in sales of up to 3.0%. While its peers' results waned, Costco's same-store sales rose 10.0% year-over-year, above the 7.6% analysts had expected, thanks to a 41.0% surge in gasoline prices. The warehouse club, which members pay a fee to join and purchase goods in bulk, saw international sales rise 9.0% as favorable currency exchanges, especially in Canada, helped its top line. Wal-Mart fell 3.8%, or $2.30, to $58.48, and Target tumbled 3.5%, or $1.60, to $58.44, while Costco added 40 cents to $66.12 during morning trading in New York. Teen retailer Pacific Sunwear (nasdaq: PSUN - news - people ) posted a worse-than-expected 4.0% drop in July same-store revenue, hurt by weak sales of swimwear and accessories. Kiddie retailer Children's Place (nasdaq: PLCE - news - people ) also disappointed, reporting flat sales when analysts had expected a gain of 7.0%. (See "Teen Retailer's Back To School Blues") American consumers have been cutting back on spending as home prices fall and gas and grocery prices remain high.
Discover's U.S. Spending Monitor, a monthly index of consumer spending intentions and means, was virtually flat in July, inching up just one-tenth of a point, to 86.1. The report indicated that consumers are curbing discretionary spending and are increasingly concerned about declining home prices and assets.