Languid September Sales May Portend a Sluggish Holiday Shopping Season

By ABIGAIL GOLDMAN

Oct. 11, 2002 12 AM PT

TIMES STAFF WRITER

Warm weather, the weak stock market and concern over a possible war with Iraq kept many would-be shoppers out of stores in September, another warning sign that this year’s holiday gift-buying season may not be merry for retailers or the U.S. economy, analysts and merchants said Thursday.

Retail sales in stores open at least a year rose a scant 1.2% in September from a year earlier, according to Goldman Sachs’ retail composite index.

The poor showing was especially troubling to economists, many of whom expected sales to look strong compared with the sharp drop-off in the weeks after the Sept. 11 terrorist attacks. Sales in September 2001 were flat.

“This paints a very pessimistic outlook for holiday shopping,” said Michael Niemira, senior economist at Bank of Tokyo-Mitsubishi in New York. “If we see another drop in consumption in the overall economy, my view is that it would be a new recession.”

Adding to many retailers’ woes is the tangle at West Coast ports, which threatens some holiday sales because of delays in getting key merchandise such as apparel, toys and housewares delivered to stores.

Although the offloading of ships has resumed after nearly two weeks of disruption, the backlog of containers already on the docks and on ships still moored off the coast could mean that some merchandise is several weeks away from getting to store shelves.

Gap Inc., which posted its 29th straight month of declining same-store sales, said merchandise delays caused by the lockout at the ports could cut the San Francisco-based company’s fourth-quarter earnings by half. The parent company of Gap, Banana Republic and Old Navy stores said a quarter of its holiday merchandise was sitting in containers waiting to be offloaded.

Gap’s same-store sales fell 2% last month, slightly better than some on Wall Street expected. Its stock rose 12 cents to $9.42 on Thursday in New York Stock Exchange trading. The Standard & Poor’s index of 87 retail stocks rose 1.9%.

Same-store sales, or sales at stores open at least a year, are a key measure of a retailer’s health. The figure excludes sales from new and closed stores, which can skew results.

Analysts were troubled by September’s sales tally because of the nearly across-the-board weakness.

Discount stores, which have routinely out-performed the rest of the sector, again fared better than department and specialty stores

Costco Wholesale Corp. was among the discount leaders, posting a 5% same-store sales gain.

But Wal-Mart Stores Inc., the world’s largest retailer and usually a performance leader, pulled out a 3.3% same-store sales gain to hit the lower end of its plan--only after revising its numbers downward midway through the month.

Target Corp. reported a 0.8% decline in same-store sales, and Kohl’s Corp., a hybrid discount and department store adored by investors and shoppers, suffered its worst month in at least five years, with same-store sales falling 3.2%. Kohl’s shares fell $5, or 9.2%, to $49.45 on the NYSE. Kohl’s is rolling out the first of about 30 stores in California early next year.

“Even the high and mighty fell,” said Todd Slater, an analyst with Lazard in New York. “It was a very depressing month.”

In the department-store sector, Federated Department Stores Inc., May Department Stores Co., J.C. Penney Co. and Sears, Roebuck & Co. reported sales that were flat to 3.1% lower than a year earlier. One exception was Fresno-based Gottschalks Inc., which has 13 Southern California stores. It reported a 1.4% gain.

California-based specialty merchants such as Hot Topic Inc. and Pacific Sunwear Inc. posted above-average gains, while Wet Seal Inc. said sales plunged 7.3%.

Higher-end chains were a bright spot in Thursday’s numbers, with Sharper Image Corp., Saks Inc. and Neiman Marcus Group Inc. posting strong gains.

That’s one reason Slater isn’t ready to write off the holiday season.

“September is not a proxy for Christmas,” Slater said. “I think it’s a proxy for how weak the consumer is, but I don’t think at the end of the day consumers are going to ignore Christmas, which could be better than people think.”

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Retails Sales

Percentage change in September same-store sales from year-ago period:

Retailer & % change

Limited Brands -- +6.0%

Hot Topic -- +5.9

Pacific Sunwear -- +4.4

Wal-Mart -- +3.3

Nordstrom -- +1.7

Gottschalks -- +1.4

Federated (Macy’s) -- 0

Target -- -0.8