Retail News Breaks
August sees the strong get stronger
August 31st, 2012
NEW YORK – Among mass market retailers, August saw the strong get stronger while some regional discount chains struggled. For specialty retailers and department stores, summer drew to a close on a solidly positive note, perhaps reflecting an uptick in consumer sentiment.
The Thomson Reuters/University of Michigan consumer sentiment index rose to 74.3 during August, its highest level since May and well above economists’ forecast of 73.6. July’s index was 72.3.
While consumer spending was facilitated by discounting and low interest rates, consumers’ optimism was related to their success in paying down debt. "Rather than citing income changes, consumers were more likely to cite favorable shifts in the amount of their outstanding debt and the value of their assets," said Richard Curtin, director of the index.
The index of current economic conditions also improved, rising to 88.7, the highest point since January 2008, from 82.7 in July. Looking toward the future, however, those surveyed were far less sanguine: The index of consumer expectations fell to 65.1, the lowest level since December 2011. Half of those surveyed assessed their financial situation as worse than it was five years ago, and most expected no wage increases during the coming year.
Against that background, Costco reported an 8% rise in total sales to $7.4 billion for the four weeks ended August 26. On a comparable-store basis, sales for the entire company grew 6%, with domestic warehouses turning in a 7% increase while international units reported a 4% gain. Gasoline price inflation boosted sales, while foreign currency exchange had a negative impact on international results.
Factoring out those influences, comparable-store sales for the total company and across domestic and international warehouses rose 6%, easily beating the 4.5% average increase expected among analysts surveyed by Thomson Reuters.
Target Corp. also reported a strong outing, with net retail sales up 4.7% to $5.54 billion as comparable-store sales expanded 4.2%, well ahead of the 3.1% increase expected by analysts. "We’re pleased with Target’s August comparable-store sales increase, which was near the high end of our expected range," said Gregg Steinhafel, chairman, president and chief executive officer. "Sales were stronger in the second half of the month, as guests responded to Target’s broad assortment and compelling value for their back-to-school and back-to-college shopping."
At Memphis-based Fred’s Inc. executives found reason for optimism in the regional discounter’s performance even though comparable-store sales fell 2.8% following a 1.6% increase a year ago. Total sales for the month rose 2% to $139.9 million.
"Although comparable-store sales for August were slow, an increase in late back-to-school sales put us ahead of our recently issued guidance for the month," said chief executive officer Bruce Efird. "In addition, our pharmacy department’s performance remained strong, primarily due to ongoing script growth and generic drug introductions, together with our aggressive pursuit of new pharmacy acquisitions."
A variety of factors combined to lower sales at Alco Stores Inc., headquartered in Abiline, Kan. According to president and CEO Rich Wilson, the drought in the Midwest and later school openings both had a negative impact on the top line, while the company shifted some of its promotional spending out of August into the fourth quarter. As a result, sales from continuing operations excluding fuel decreased 0.9% to $32.2 million, while same-store sales excluding fuel fell 4.3%.
Alco is joining the growing ranks of general merchandise retailers offering perishable food, as it plans to introduce frozen food in 153 stores during the month of October. "Over the past two years Alco has built a loyal customer base for groceries and other daily needs," Wilson said. "The addition of frozen meal solutions, pizza, deli meats and ice cream is a natural extension of our successful dry grocery franchise. We anticipate this significant enhancement will drive customer traffic and build average basket size."
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