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Brisk back-to-school sales a relief for retailers

September sales at major chain stores rise 2.8% from a year earlier, beating analysts' predictions and nurturing hopes of a healthy holiday shopping season.

October 08, 2010|By Andrea Chang, Los Angeles Times

Although it came late, back-to-school season made the grade for retailers this year after two disappointing seasons, boosting hopes that the holidays could see healthy sales as well.

Retailers said back-to-school sales were strong during the first half of September as students rushed to youth-oriented shops and department stores to stock up on new outfits.

Considered a good barometer of discretionary spending, the teen apparel sector delivered a strong 6.7% sales gain last month, significantly better than the expected 0.5% increase and its best result since April 2008, according to a monthly tally of retailers by Thomson Reuters.

Overall, major chain stores reported September sales results Thursday that showed a 2.8% increase over the same month a year earlier, Thomson Reuters said. The rise was better than the 2.1% increase that analysts had predicted, and more than three-fourths of retailers beat or met expectations.

Among the month's strongest performers were action-sports retailer Zumiez Inc., which posted a 17% year-over-year increase; teen chain Abercrombie & Fitch Co., with a 13% rise; and Limited Brands, parent of such mall regulars as Victoria's Secret and Bath and Body Works, which posted a 12% gain.

The results were a relief for retailers because September was the first month this year to face difficult year-ago sales comparisons and because back-to-school sales got off to a slow start this summer.

Still, September's performance was "somewhat uneven," with upscale retailers including Nordstrom Inc. and Saks Inc. performing especially well, said Michael Niemira, chief economist of the International Council of Shopping Centers. He said overall sales, while positive, were hampered by abnormally warm weather, which curbed demand for fall merchandise.

"The fact that luxury continued to post a strong performance is not surprising given the recent improvement in high-income-household consumer confidence," he said. "This is especially encouraging for the economy and the upcoming holiday shopping season because the top 20% of households by income account for nearly 40% of total consumption."

Industry experts are still taking a cautious tone about the holidays as retailers turn their attention to the all-important season. Consumer spending has lost a bit of steam in recent months, which has caused some economists to worry that shoppers will spend frugally for the third Christmas in a row.

This week, the National Retail Federation estimated that holiday sales would rise a modest 2.3% over last year and warned that lingering economic uncertainty would be a major factor in how consumers shopped for presents and other holiday-related items.

The nation's high unemployment rate and the lack of job growth continue to be chief among consumers' worries, so merchants will have to work hard to lure nervous shoppers, said Jack Kleinhenz, the trade group's chief economist, in a call with reporters.

"What we need is consistency and durability of the economy and economic policies," he said. "As we go into the holiday season, we'll see a lot more promotions…. Retailers are going to want to create the opportunity to buy."

At the Beverly Center recently, Estella Jarcia, 32, was looking for a new outfit for work but said her buying habits weren't what they used to be.

"I'm shopping less, definitely, because I feel guilty shopping when there are people out of jobs," the retail buyer from Los Angeles said. "I used to shop every weekend, and now I shop twice a month, if that."

Weaker September performers included Hot Topic Inc., with a 2.6% decline; apparel retailer Gap Inc., where sales fell 2%; and teen chain Wet Seal Inc., which saw sales drop 0.7%.

Results are based on sales at stores open at least a year, known as same-store sales and considered an important measure of a retailer's health because it excludes the effect of store openings and closings.

For October, which is traditionally a quiet retail month as consumers take a break from back-to-school splurging and gear up for Christmas, the International Council of Shopping Centers is estimating sales will increase 2.5% to 3%. Zumiez and Ross Stores Inc. warned that they would probably post only single-digit sales increases for the month.

For the holidays, economist Kleinhenz said merchants would have to respond to a "seismic shift in the mind-set" of many consumers, who may have become comfortable with a decreased level of spending.

Shopper Lynne Dufresne, 50, echoed that sentiment while browsing for dresses at a Forever 21 store in Los Angeles recently, saying she cut back when the recession hit and hasn't returned to her former buying habits.

"I've adjusted — I just shop less now," said Dufresne, a counselor from Hollywood. "It's changed me, but I think that's for the better."

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