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Retail Sales Up 5.9% in September

Merchants make best gains since March 2002. California companies are especially strong.

October 10, 2003|Abigail Goldman | Times Staff Writer

Shoppers last month made it clear that they're back and ready to buy, buoying Wall Street's hopes for a strong holiday season in the long-suffering retail sector.

Overall retail sales in September gained 5.9% over the same period a year ago in stores open at least a year, the best results since March 2002, according to results reported Thursday by the Bank of Tokyo-Mitsubishi in New York.

Wal-Mart Stores Inc., the world's biggest retailer, saw its September sales rise 6%, better than its forecast of a 3%-to-5% increase. Sears, Roebuck & Co., Target Corp. and Gap Inc. also posted same-store sales last month that were at the high end of analyst estimates.

"Sales were really quite stellar across the board, with better than expected gains in almost all classifications and categories," said Carl Steidtmann, chief economist with Deloitte Research in New York.

"It's a very solid environment for consumer spending right now," he said. "Between tax cuts, home mortgage refinancing and a little bit of growth in employment ... that combines to give the consumers cash."

Retailers said strong back-to-school sales in August mostly held steady through September. Apparel sales were boosted by lower temperatures across much of the country, and that was particularly good news for the teen retailers, many of which are based in California.

"One segment of the labor force that has shown pretty good growth is temp or part-time employment, and that tends to be more teenager-oriented," Steidtmann said. "Not only are they getting more money from their parents, but they're also making more money."

The September numbers are a good omen of stronger holiday sales, according to analysts. Economists have predicted that this Christmas season would be the best in years for retailers, as the nation's jobs and wage growth continues to improve.

The strong results last month prompted the National Retail Federation on Thursday to boost its holiday sales forecast to a gain of 4.1%, up from 3.5%. "The long-awaited bounce in economic activity has finally arrived," said Rosalind Wells, the federation's chief economist.

Tokyo-Mitsubishi analyst Michael Niemira agreed that the outlook for merchants was promising.

"Nascent signs of an improving economy are likely to keep the consumer ready and willing to spend," he wrote in a report released Thursday.

Another encouraging sign was that the retail industry was heading into the fourth quarter with lean inventories. Analysts expected that would help lead to healthier profits because fewer retailers are likely to resort to early clearance sales, which ripped through earnings last year.

Gap Inc., the San Francisco parent company of Gap, Banana Republic and Old Navy stores, was one of September's biggest winners, with sales overall up 13% in stores open at least a year. Analysts had expected a 5%-to-7% sales gain.

Gap's Old Navy division posted the strongest sales gain, up 16% over last year, as shoppers snapped up women's long-sleeve knit tops and outerwear and men's cargo bottoms and jeans, the company said.

At Gap stores, where same-store sales rose 13%, demand was strong for men's relaxed boot-cut jeans and women's dressy slacks and skirts. Although shopping mall traffic in general was down across the country, analysts noted, traffic at Gap stores was better than a year ago, attesting to the chain's powerful marketing campaign and improved offerings.

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

Los Angeles-based Guess Inc. and Anaheim-based Pacific Sunwear of California Inc. also posted double-digit gains, with Guess up 13.5% in September compared with a year earlier and PacSun gaining 18.5% in stores open at least a year. PacSun said Thursday that higher-margin guys' and girls' clothes both rose by double digits, particularly on the strength of woven tops, fleece and outerwear.

Hot Topic Inc., based in the City of Industry, said Wednesday that its same-store sales rose by 9% for the month. With edgy, music-related merchandise, Hot Topic credited its gain on an increase in the average number of transactions per store.

Burlingame, Calif.-based kids' clothier Gymboree Corp. also showed strong gains last month, with same-store sales up 8%.

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(BEGIN TEXT OF INFOBOX)

Big gains

Many retailers reported strong sales last month.

Percentage change from a year ago in September sales at stores open at least a year

*--* Company %change Pacific Sunwear +18.5% Guess +13.5 Gap +13.0 Hot Topic +9.0 Gymboree +8.0 Limited Brands +8.0 TJX +8.0 Wal-Mart +6.0 Target +5.4 Ross +5.0 Federated +3.2 Sears +3.2 J.C. Penney +0.7 May +0.4

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Sources: Associated Press, company reports

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