CORRECT:UPDATE:Retailers Post Mixed Results;Promotions Lift Sales

U.S. retailers reported mixed results for June, with some stores benefiting from aggressive promotions and others hurt by consumers' continued restrained spending.

Retailers from department stores to teen retailers responded to limited demand with promotions that were reminiscent of 2009's holiday season. Big sales during June are common as retailers try to clear shelves for fall merchandise, especially back-to-school apparel. But a number of analysts are calling June's discounting steep.

"Many retailers pulled out all of the stops with respect to promos in June," said Brian Sozzi, retail analyst at Wall Street Strategies. "During our store walks throughout the month, the level of promotions picked up relative to previous months."

Retailers that surpassed analysts' expectations were mostly quiet about increasing their second-quarter guidance, raising questions about whether the promotions, while aiding sales, came at the cost of lower income for the items.

The retailers that are doing best amid what was a very promotional atmosphere "have learned to carry fewer styles and less units per size," said Madison Riley, managing director at Kurt Salmon Associates. "This helps minimize markdowns and helps improve profits."

One of the biggest surprises were the strong numbers from Abercrombie & Fitch Co. (ANF), where same-store sales rose 9%, above analysts' average estimate of 2.8%. Abercrombie was aggressive with its promotions last month, including selling shorts at half-price at its Hollister chain.

TJX Cos. (TJX) and Ross Stores Inc. (ROST), meanwhile, boosted their fiscal second-quarter earnings expectations as the discount apparel retailers reported further same-store-sales growth.

Elsewhere, Macy's Inc. (M) posted a 6.5% rise, when a 6.1% gain was expected. The department store didn't lift its guidance but added that it was "optimistic as we look ahead to our fall merchandise offerings," Chief Executive Terry Lundgren said.

Same-store sales at J.C. Penney Co. (JCP) rose 4.5%, better than the expected 3.4% gain, and the department store called out apparel as showing "stronger underlying trends" during the month. Geographically, all regions recorded same-store sales increases, with the southeast region reporting the best results, Penney said.

Apparel retailer Limited (LTD) and teen store Zumiez (ZUMZ) also gave stronger-than-expected results.

Kohl's Corp. (KSS), meanwhile, came up short of analysts' projections, posting a 5.9% rise when 6.5% was expected. "As expected, we reported stronger sales early in the month as the Memorial Day holiday fell in fiscal June this year," Chief Executive Kevin Mansell said.

Mass merchant Target Corp. (TGT) also failed to see much momentum, posting a 1.7% gain when analysts expected a 2.7% advance.

"Sales in electronics, video games, music and movies were particularly soft for the month," said Target Chief Executive Gregg Steinhafel. "We continue to plan our business cautiously." Target said it expects July same-store sales to be up in the low single digits.

Costco Wholesale Corp. (COST)--which said same-store sales grew 4% in June, below the average analyst estimate of 4.2%--explained that sales were helped by inflation in gas prices and strengthening foreign currencies; however, the company also noted that the shift in Memorial Day hurt sales by about 2%.

Wet Seal Inc.'s (WTSLA) June sales dropped 3.6%, below projections, and the teen retailer said it sees second-quarter earnings below its prior guidance. Customer traffic was "inconsistent," the company said.

Retailers were expected to report 3.2% growth at stores open at least a year, according to the 28 companies tracked by Thomson Reuters. The estimate compares with a 4.9% drop last year. Same-store sales are considered a key barometer of retailers' health because the figures allow clean comparisons as opposed to overall sales because store numbers fluctuate.

The nation's largest retailer, Wal-Mart Stores Inc. (WMT), no longer reports monthly sales.

"We're almost treading water compared to the building spending momentum we saw at the beginning of the year," said Mike Berry, director of industry research at MasterCard Inc.'s Spending Pulse unit. "At the beginning of the year, people were anticipating good news and spending increased. When economy didn't turn around, consumers took a step back."

The U.S. economy shed jobs in June for the first time this year, and the unemployment rate remained high, while consumer confidence dropped sharply.

-By Karen Talley, Dow Jones Newswires; 212-416-2196; karen.talley@dowjones.com

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