The July 1 federal income tax cut, which the Reagan administration hopes will spur consumer spending and lead the economy out of recession, did little to boost sales of the nation's major retailers in July, analysts and retail executives said yesterday.
Monthly sales reports released by the nation's big chains indicated continued flatness in economic activity--an "interlude of stagnation," as Treasury Secretary Donald Regan put it in a speech yesterday.
Last month, the nation's six largest retailers posted an average sales gain of slightly more than one percent over July 1981. Because inflation in the retail industry is running about 4 percent, the modest increase in sales represents a decline in real terms.
J. C. Penney, Montgomery Ward and F. W. Woolworth reported their sales were lower this July than they were in July 1981. Sears, Roebuck and Co., K mart Corp. and Federated Department Stores reported modest sales increases that barely kept pace with the rate of inflation.
"The tentacles of recession are still quite well-wrapped around the retailing industry," said Woolworth's spokesman Joe Carroll. "We were pleased to have the slight increase in domestic sales in July."
Executives of the national chains and local department stores said it is too early to tell what impact the 10 percent federal tax cut will have on retail sales for the full year. But all agreed that the tax cut's boost to consumers' disposable income contributed little to department store sales in July.
Frequently, however, increases in consumers' take-home pay do not show up in increased buying for several weeks.
The tax cut will put an additional $30 billion a year in consumers' pockets, adding $11 to the weekly take-home pay of someone who earns $500 a week.
M. Kathryn Eickhoff, executive vice president of the economic consulting firm Townsend-Greenspan Inc., said that the increased take-home pay may have been more than offset by "an unusually large number of companies" that are shutting their plants for extended vacations because of slow sales. Those "extended vacations" are akin to layoffs and employes are not paid.
The worst performance among major stores was turned in by Chicago-based Montgomery Ward, the nation's sixth-largest retailer, which reported a 3.5 percent drop in July sales from $412.2 million last year to $398.0 million this year.
Penney's and Woolworth's, the third- and fourth-biggest retailers, both reported sales declines of 0.5 percent last month. Both chains blamed declines in foreign sales for the July drop, noting that their domestic operations showed slight gains. Penney's sales for the month fell to $788 million from $792 million last year. Woolworth's sales slipped to $488.1 million from $490.7 million in July 1981.
Sears, the nation's biggest retailer, said sales inched up 0.8 percent to $1.498 billion from $1.487 billion in July 1981.
K mart, the large discounter and the second-largest retailer, reported a sales gain of 4.4 percent. For the four weeks ended July 28, sales were $1.23 billion compared with $1.18 billion in 1981.
Cincinnati-based Federated, the fifth-largest retailer and operator of Filene's and the Bloomingdale's stores in the Washington area, reported overall sales rose 5.3 percent in July, to $467.1 million from $443.6 million. Sales by Federated's department stores were up 3.6 percent; sales at the chain's discount stores were up 18.6 percent.
K mart representative Susan McElvey attributed the firm's 4.4 percent gain to special promotions the chain staged during July rather than to the tax cut. "The mood of the consumer is still on the low side," she said.
The two major department stores in the Washington area--Hecht's and Woodward & Lothrop--do not release monthly sales data. Officials said, however, that sales in July were ahead of last year, but they didn't attribute any gains to the tax cut.