Retail Sales Climb 3.2% in August
The nation’s retailers got a passing grade for their back-to-school sales in August, but shifting shopping patterns left analysts wondering whether merchants would be happy with their year-end report card.
Sales at stores open at least a year rose 3.2% last month from a year earlier, a Goldman Sachs retail index showed, slightly exceeding forecasts of a 3% run-up.
“It was a decent performance -- the expectations were quite low for back-to-school,” said Michael P. Niemira, chief economist for the International Council of Shopping Centers. “Longer term this year, you can see a moderation. Not dramatic, but I think it certainly was part of the concern as we headed into the back-to-school season.”
Many shoppers, feeling the effects of high energy bills, sought lower-priced alternatives.
Last year, Sharon Martinez looked for clothes for her 8-year-old daughter at stores such as Old Navy and Gap. This year, increases in the 28-year-old accounting clerk’s gasoline costs and utility bills have her turning to Target and area swap meets.
“I’m trying to do bargain shopping,” said Martinez, a single mother living in Hollywood, in a Target’s school supplies aisle Wednesday night. “I’m just trying to save wherever I can.”
For stores with the right stuff -- American Eagle Outfitters Inc., Abercrombie & Fitch Co., Federated Department Stores Inc., Gymboree Corp. and Nordstrom Inc. -- August was far better than some on Wall Street had expected.
But others are feeling the gradual slowdown in spending growth. Among the laggards last month were several California companies, including City of Industry-based Hot Topic Inc., Anaheim’s Pacific Sunwear Inc. and San Francisco-based Gap Inc., which has posted sales drops in 24 of the last 27 months.
The giant discounters posted mixed results. Wal-Mart Stores Inc. posted a gain of 2.7%, at the higher end of its estimate for an increase of 1% to 3%. Target Stores Inc. reported a 2.8% increase, which was below the company’s 3% to 4% projection.
Overall, investors were encouraged by the numbers. A Morgan Stanley index of the shares of 35 national chains rose 1.7% on Thursday.
Sales have slowed since spring -- meaning that August’s winners succeeded by stealing market share from competitors rather than enticing consumers as a whole to spend more, Niemira said. A year earlier, sales at established stores rose 3.8%, according to Goldman Sachs.
Sales at existing stores, or same-store sales, are an important measure of a retailer’s health because the figure excludes new and closed stores, which can skew results.
Niemira said his group’s surveys also have found shoppers to be more interested in price than selection this year -- the opposite of last year’s findings.
Los Feliz resident Caroline Kessler, 45, and her 13-year-old daughter, Margot, were searching Target for a black backpack -- ideally a JanSport model -- for Margot’s 16-year-old brother.
After scouring the racks, she saw the perfect one: a silver-and-black number with built-in controls for an Apple iPod MP3 player. But one look at the $60 price tag and the backpack headed right back to the rack.
“He can forget it,” she said, calling the iPod controls a “marketing ploy.” “I don’t see why I should spend more than $25 for a backpack.”
Kessler, who owns her own marketing business, said she tries to buy only things on sale. She went to Staples for school supplies and the Puma shoes outlet store, American Eagle and Quicksilver Inc.’s Roxy for Margot’s clothes -- almost all of which were discounted.
Shoppers such as the Kesslers have some analysts questioning whether part of August’s better showings were the result of steep promotions and markdowns, which could spell trouble for earnings.
Lazard Capital analyst Todd Slater said in a note to clients: “We have become increasingly cautious on the teen space, as supply could be beginning to outstrip demand, leading to increased discounting and possible downside earnings surprises.”
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Gain for some
Year-over-year percentage change in August sales at stores open at least a year
*--* Retailer % change Gymboree +17.0% Bebe +12.5 Limited Brands +9.0 Wet Seal +8.7 Nordstrom +7.1 Guess +4.0 Federated +3.8 Ross +3.0 Target +2.8 Wal-Mart +2.7 J.C. Penney -0.5 Hot Topic -6.0 Gap -7.0 Pacific Sunwear -9.4 Sharper Image -22.0
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Source: Company reports
