Retail stores use discounts, gimmicks to counter slow sales

NEW YORK - Stores deepened discounts more than planned in June to draw recession-scarred shoppers to buy summer tops and other merchandise. But shoppers bought mostly items they needed, resulting in small revenue gains.

The mixed results from June, released Thursday, are raising concerns about the back-to-school season and consumers' ability and willingness to boost spending.

The International Council of Shopping Centers' index of June retail sales rose 3 percent, the low end of its growth forecast that ranged from 3 to 4 percent. But that's compared with a 5.1 percent decline in June 2009.

The figures are based on revenue at stores open at least a year.

Among chains based in or near the Philadelphia area that reported Thursday, Bon-Ton Stores Inc. reported an increase in same-store revenues. The York, Pa., department store operator said that revenue in stores open at least one year rose 1.4 percent in June.

But Philadelphia-based Destination Maternity Corp. said that June same-store revenue fell 2.2 percent. That includes a 4.4 percent drop at stores but a 43.3 percent increase in online sales.

Nationally, the third straight month of modest sales gains after a surprisingly solid start to the year underscores the choppiness of the economic recovery. It also puts more pressure on retailers to come up with innovative tactics to get shoppers to spend in the critical months ahead, instead of just resorting to price slashing.

Already, office supplier Staples Inc. is pushing penny deals, and teen merchant American Eagle Outfitters Inc. is promoting another gimmick starting later this month - anyone who tries on a pair of jeans will get a free smart phone.

"I think the competition is going to be intense," said Sherif Mityas, a partner in the retail practice at management consultant A.T. Kearney. "The economy is recovering in fits and starts."

Back-to-school merchandise starts flowing into stores next week. It accounts for almost 40 percent of total retail revenue from July through September, Michael P. Niemira, ICSC's chief economist, estimates.

June's results, which cover the period from May 30 through Saturday, were inflated by a late Memorial Day weekend, which lifted results by 1 percentage point last month and deflated May by the same amount, according to Niemira.

After ramping up spending surprisingly in the first quarter, shoppers have hunkered down since April, going out to stores only to buy necessities.