U.S. retail sales sluggish in June

Major U.S. retailers reported sluggish sales figures for June, a discouraging sign for an economy that's struggling to gain traction after a painful recession.

Major clothiers reported poor same store sales data on Thursday, with deep discounting being necessary in many cases to coax shoppers into opening their wallets.

Gap Inc. reported flat sales at its stores open more than a year, an improvement on the 10 per cent decline during the same month last year but well under analysts' expectations.

The chain's higher-end Banana Republic stores saw same store sales grow by six per cent, while the downmarket Old Navy chain reported flat sales.

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

Teen retailer American Eagle Outfitters Inc. reported same-store sales fell by one per cent during the month.

Rivals Abercrombie & Fitch and Aeropostale both surprised on the positive side, with nine and eight per cent sales growth during the month. But Abercrombie still has a long way to go to make up for the 32 per cent drop in sales it saw in 2009.

June is typically a time when retailers discount heavily to clear out merchandise in advance of the key back-to-school shopping season in August. But analysts say discounting was heavier than expected as stores had to work hard to pull in shoppers continuing to grapple with a deluge of financial issues.

Retail sales are a key economic indicator because consumer spending represents more than three-quarters of the U.S. economy.

Department stores, with their ability to sell higher-margin luxury goods, fared generally better. Target posted a 1.7 per cent same store sales gain during the month, with clothing, food, and health and beauty products being strong sellers. But electronics, video games, music and movies were weaker.

Higher-end chain Macy's enjoyed a 6.5 per cent sales gain in June. J.C. Penney enjoyed a 4.5 per cent gain while Saks Inc., which operates Saks Fifth Avenue, rose 2.5 per cent during the month.