By Andria Cheng, MarketWatch
NEW YORK (MarketWatch) -- Retail stocks dropped Tuesday after U.S. personal incomes had the biggest drop in four years.
The S&P Retail Index (RLX 357.48, -2.72, -0.76%) fell 0.8% to 357.40.
Personal incomes of U.S. residents fell 1.3% in June, reversing the 1.3% gain in May that was due to a one-time stimulus payment to Social Security recipients, the Commerce Department reported Tuesday.
Excluding the one-time payment in May, incomes fell 0.1% in June after a decline of less than 0.1% in May. Incomes are down this year despite the continuing prop to incomes from the stimulus, including tax credits and expanded unemployment benefits.
Separately, consumer spending rose 0.4%. After adjusting for inflation, real consumer spending dropped 0.1% in June, the third decline in the past four months. Real consumer spending is down 2% since the recession began. See full story.
Retailers' sales have been hurt by increased savings by consumers and the decline in their income. Retailers' July same-store sales are expected to decline about 5.5%, according to the International Council of Shopping Centers. Most retailers report their results on Thursday.
Chain-store sales for the week ended Aug. 1 fell 0.7% from the year-earlier period, according to a survey released Tuesday by the ICSC and Goldman Sachs.
"Sales gave back a little over the last week as the later back-to-school state sales tax holiday dates trimmed the year-over-year sales comparison a tad, but will tend to lift sales in the current week," said Michael Niemira, ICSC's chief economist. "July sales are likely to be weak due to sharp markdowns on clearance items and, in some cases, more limited inventory to clear, as well as cooler than normal weather for the month that pared seasonal demand."
CVS Caremark Corp. (CVS 34.92, +0.92, +2.71%) shares rose 3.4% after the drugstore chain raised its profit forecast for the year. It said Tuesday that its second-quarter profit rose to $886.5 million, or 60 cents a share, from $774.8 million, or 53 cents, a year earlier. Revenue rose to $24.9 billion from $21.1 billion. Excluding items, the company said it would have earned 65 cents a share. CVS raised its forecast of adjusted profit from continuing operations for the year to $2.59 to $2.64 a share from a previous guidance of $2.55 to $2.63. Analysts, on average, estimated the drugstore chain to earn 63 cents a share in the second quarter and $2.55 for the year, according to FactSet.
Walgreen Co. (WAG 30.50, -0.59, -1.90%) shares fell 1.8% after the pharmacy chain said that its July same-store sales rose 2%, including a 3.8% gain in comparable pharmacy sales and a 1.3% decrease in non-pharmacy sales.
Talbots Inc. (TLB 5.58, +0.48, +9.31%) shares rose 7.8% after its stock was upgraded to outperform from market perform by FBR Capital Markets. Analyst Adrienne Tennant said the company has made improvements controlling its inventory and used its promotions and price cuts more efficiently to move merchandise.
