Nation’s Shoppers Continue Their Months-Long Spree
Consumers continued their spending spree in October despite uncertain economic news, leading to predictions Thursday that the coming holiday season might rank among the strongest this decade.
Shoppers ignored the roiling stock market and signs of an economic slowdown to drive retail sales up by more than 4% in October, beating analysts’ expectations. Discount stores and specialty retailers showed the biggest gains.
“It’s another upbeat signal on the upcoming holiday season,” Bank of Tokyo-Mitsubishi analyst Michael Niemira told Bloomberg News. “It will be as good--if not better-- than last year.” Last year was retailers’ best holiday season since 1994.
The Bank of Tokyo-Mitsubishi said same-store sales at the nation’s leading retailers climbed 4.8% in October. The Lehman Bros. retail sales index, another leading measure, put the same-store sales growth slightly lower, at 4.5%.
Same-store sales measure results at stores open at least a year and are considered the most accurate measure of a retailer’s performance.
The spending reports come amid mixed economic news, with the U.S. Labor Department reporting lackluster job growth for October. But analysts said that barring any severe downturn, there is good reason to expect consumers to continue spending at a healthy clip through this month and December and into next year.
“Interest rates are low, there’s high employment and job security, and the real estate market is strong,” said Richard Giss, a partner in the Consumer Business Practice Group at the Los Angeles offices of Deloitte & Touche. “The underlying economics for consumer spending are excellent.”
The National Retail Federation, an industry trade group, expects an overall holiday sales gain of 5% to 6% over the same November-December period last year.
The trade group forecast weaker sales growth in Southern California, however, where Asian tourism has already taken a toll on retailers, particularly luxury chains. And with California outpacing the nation in household formation, new home buyers have less money left over for shopping sprees, analysts said. An NRF pollster predicted that holiday sales would rise by only 2% to 3% in Southern California.
Last year, the region outpaced the nation, with holiday sales in Southern California growing by 5% compared with 4.5% nationally.
Some local shoppers this week said they plan to spend more money on holiday gifts, undeterred by the economy’s crosscurrents.
“I will be spending more,” said Elizabeth Houston, a Pierce College student shopping at Topanga Plaza in Canoga Park. “I have a job; I’m on my own now. I have more friends and more money. When you get more, you should spend more on other people.”
But other shoppers said they are worried that the Asian economic crisis will spread.
“You see what’s been happening in Asia and you can’t help but wonder if that’s going to happen here,” said Burbank resident Sally Pembroke as she shopped at the Glendale Galleria. “So far things seem to be OK, but you never know what will happen in the next six months.”
And despite the good October sales report, some analysts also see clouds on the horizon, noting that the overall pace of spending is slowing. Analysts noted that October sales lagged September’s 5.5% gain and a 4.7% increase recorded last October, according to Lehman Bros. figures.
“It was a mixed to disappointing month,” said Joseph Ronning, an analyst at Brown Bros. Harriman in New York. “Monthly sales are slowing instead of growing.”
Department store chains said their October performance was affected by unseasonably warm weather, which tends to discourage purchases of coats, sweaters and other winter clothing.
Overall, the same-store sales record was mixed.
May Department Stores, operator of the Robinsons-May chain, reported a moderate gain of 2.8% over October of last year, but the slump at most major department stores continued. Federated Department Stores, the parent of Bloomingdale’s and Macy’s, dipped 1.9%; Dillard’s dropped 4%, Sears fell 1.9% and J.C. Penney dropped 2.8%. Dayton Hudson’s troubled Mervyn’s unit posted a 3.9% sales drop.
Sales at Gap Inc.--operator of the Gap, Banana Republic and Old Navy clothing chains--surged 18%. Talbots and AnnTaylor, sellers of women’s career clothing that have evidently recovered from their slumps, reported gains of 26% and 16%, respectively. Analysts attributed those chains’ results to better clothing selection. Limited said same-store sales rose 3%.
Discounters continued to grab sales from department stores. Wal-Mart led the way with a 7.7% sales gain, and Kmart reported a 4% increase. Target, a unit of Dayton Hudson Corp., said same-store sales in October rose 4.2%.
“Overall, it was a pretty respectable month,” said Michael Exstein, an industry analyst at Credit Suisse First Boston in New York.
Bargain hunters contributed to good October sales at Camarillo Premium Outlets in Camarillo and at Desert Hills Premium Outlets in Cabazon. “Store traffic is rising and that’s always a good indication that we’ll have a good Christmas,” said Michele Rothstein, marketing manager of mall operator Chelsea GCA in Roseland, N.J.
At the toney Century City Shopping Center, retailers expect healthy holiday sales. “We’re expecting a good, solid Christmas with sales increases in the 4% to 5% range,” said Linda Frost, mall marketing manager. “We estimate that October sales were in the 3.5% range.”
Times staff writers Karen Robinson-Jacobs and Ken Woo contributed to this report.
