Retailers report surprising August sales gains
The nation’s retailers offered some encouraging news on the economy Thursday by posting surprisingly solid August sales figures.
Heavy discounts during the back-to-school season, which were deeper than retailers had offered in years, drove healthy levels of traffic and sales. Tax-free holidays that were held in several states in August also provided an additional boost.
Major chain stores reported a 3.3% sales gain compared with a year earlier, according to Thomson Reuters’ tally of 27 retailers. Analysts had expected a more modest 2.5% rise. Sales rose in all categories including discounters, department stores and apparel chains. Two-thirds of retailers either beat or met expectations.
That was a relief after two years of sluggish back-to-school sales, but retail analysts and economists say retailers need to be prepared for what’s expected to be a highly competitive fall and another tough holiday season.
Although the August numbers were better than expected, a full economic recovery will still take time especially given high unemployment and last month’s disappointing housing figures, said Ken Perkins, president of research firm Retail Metrics Inc. He noted that the retail results were still in the low single digits and were being compared against weak sales from a year ago.
“You have to look at these numbers in the context of how easy the comparison was and how low the expectations were,” Perkins said. “While they were better and offer a glimmer of hope, they’re not the kinds of numbers that the market or retailers are going to get overly excited about. As we look ahead, the overall economy remains a big question mark.”
So consumers continue to be cautious with their spending. Several people shopping along South Lake Avenue and Colorado Boulevard in Pasadena this week said they were mainly hunting for bargains.
Shopper Ardis Proudfoot, 66, bought two T-shirts and a pair of reading glasses from Talbots, all on sale, and bought a book and a CD from Borders using a coupon.
The retired Long Beach resident said she still enjoyed shopping and hit the stores about twice a month, but made sure to spend her money in a way that made her “not feel too guilty.”
“I think people are still very careful, and I usually try to get everything that I can on sale,” she said. “If the stock market would just stay kind of stable, I’d feel more confident.”
Others said that although they were shopping, they were doing so grudgingly.
“I’d rather not be part of the back-to-school thing at all and just wait for the sales,” said Janice Bellow, who was shopping for new outfits for her 10-year-old daughter, Rosie, at the Macy’s on South Lake Avenue.
August’s strongest performers included chains across the retail spectrum. Limited Brands, operator of chains including Victoria’s Secret and Bath and Body Works, posted a 10% increase; action sports teen chain Zumiez Inc. saw sales rise 9.1%; Costco Wholesale Corp. reported a 7% gain; and Nordstrom Inc. said sales rose 6.3%.
Results are based on sales at stores open at least a year, known as same-store sales and considered an important measure of a retailer’s health because they exclude the effect of store openings and closings.
Retail executives said that although the economy remained a concern, August’s results showed that consumers were still willing to spend on items that were well-priced and on trend.
Kevin Mansell, chief executive of Kohl’s Corp., said “all regions and all lines of business” reported positive same-store sales for the month, with home, men’s and footwear doing especially well. The mid-level department store chain reported a 4.5% gain.
Terry Lundgren, chief executive of Macy’s Inc., said the department store giant’s 4.3% same-store sales increase in August was helped by strong sales of Material Girl, a new exclusive juniors brand from Madonna and her daughter Lourdes.
Last week, Nordstom opened a new store at the recently remodeled Santa Monica Place shopping center. In an interview, Erik Nordstrom, president of stores, said the company was confident that the store would be well-received by Westside residents and tourists despite continued economic challenges.
“It is a market share game as it has been for some time,” he said. “But we’re seeing this year more of a return to normal versus last year. And by that I mean, yes, price is important, but there’s still a great interest in newness, in fashion, in putting looks together.... It’s a tough environment, but customers will spend if we do our jobs right.”
Weaker players last month included teen retailers Hot Topic Inc. and Aeropostale Inc., which posted declines of 3.7% and 1%, respectively; and Gap Inc., which saw flat sales.
Retailers will begin facing difficult year-over-year comparisons this month because the industry began posting positive sales results in September 2009, Perkins said.
“The bar, which has been very low this last year, is going to be raised,” he said. “I think we’re just unfortunately headed for a long slog of slow growth and it’s going to feel uncomfortable for consumers, investors and retailers alike.”
