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August retail sales rise; outlook still uncertain

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NEW YORK — August sales overall turned out to be slightly better than expected for the nation’s retailers, but some polls suggest that consumers will be pulling back more in September as worries about home values are shaking upmarket consumers.

August sales overall turned out to be slightly better than expected for the nation’s retailers, but some polls suggest that consumers will be pulling back more in September as worries about home values are shaking upmarket consumers.

The hottest August in 25 years helped retailers clear out summer inventory but discouraged sales of fall apparel. Whether back-to-school was a success or washout remained in doubt, however, as many shoppers appeared to be pushing back their purchases to Labor Day.

"A combination of factors is driving a later B-T-S season this year," wrote Deutsche Bank retail analyst Bill Dreher in a research note issued in advance of retailers’ August sales reports. "Today’s increasingly pressured and value-focused consumers are shopping closer to need, which we expect will shift more B-T-S spending to around the Labor Day weekend."

Although the 30 retailers tracked by Kantar Retail in August (most of which were apparel retailers) generated a 3.4% weighted composite increase in same-store sales, the retail consulting and research firm also found signs of deteriorating consumer confidence that could bode ill for September results. The August figure, however, not only represented an improvement from July’s 2.9% gain but also was markedly better than the 2.4% decline in August 2009.

"August sales held up relatively well because shoppers’ intention to curb their spending plans was outweighed by their back-to-school needs, especially when they scrimped on meeting those needs a year ago," explained Frank Badillo, senior economist for Kantar Retail.

Kantar’s August ShopperScape survey found that the percentage of shoppers planning to spend less in September increased to 38%, while the ratio of those planning to spend more edged down to approximately 9%. The percentage of shoppers planning to spend about the same remained roughly the same as a year ago at 53%.

The negative shift was particularly noticeable among more affluent shoppers who cited the deterioration of their homes’ values. The outlook for B-T-S darkened as the number of shoppers spending or planning to spend more dropped to 24% from 30% a year ago, and from 29% in July. However, Kantar noted that the August respondents included an influx of older shoppers, perhaps grandparents, who may be more inclined to spend less than parents.

According to MasterCard Advisors, which analyzes data from credit cards, checks and cash payments, shoppers spent slightly more in August than they had a year before, but the numbers were far short of 2008 levels, as consumers focused on necessities and searched out discounts.

"Things are slightly better than in 2009, but we still have a ways to go to get back to where we were prior to the collapse," said Michael McNamara, vice president of MasterCard Advisors. "And from this point forward, the sales comparisons to last year are going to get tougher."
Among mass market retailers reporting monthly sales, results were mixed. Costco Wholesale Corp. posted a 6% same-store increase among its domestic warehouses, while international operations turned in an 11% gain, producing an overall increase of 7%.

Excluding the impact of gasoline price inflation and foreign currency exchange, U.S. warehouses generated a 5% rise and international same-store results grew 7%. The total adjusted same-store sales of 5% beat the 4.2% consensus among analysts surveyed by Thomson Reuters.

Target Corp., meanwhile, turned in a 1.8% uptick in comparable-store sales that met management’s goal but fell short of analysts’ 2% projection. "We’re pleased with our strong performance in back-to-school and back-to-college categories as well as our performance in apparel and food," said Gregg Steinhafel, chairman, president and chief executive officer. "Guest traffic trends remained healthy throughout the month."

Shoppers’ focus on the necessities was reflected in the strength of food, health and beauty care sales, while sales of electronics and home items were weaker.

At BJ’s Wholesale Club Inc., comparable-club sales rose 2.4% including gasoline, and merchandise sales excluding fuel improved 1.9%, far short of the 3.4% increase expected by analysts. The company reported that sales tailed off in the fourth week of the period after rising in the first three weeks. Excluding gasoline, customer traffic increased about 3%, but the average transaction declined by approximately 1%.

Memphis, Tenn.-based regional discounter Fred’s Inc. posted a 3.6% increase in comparable-store sales, which was just good enough to beat Wall Street’s forecast of a 3.5% rise.


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