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Retail sales jump 5.1%, better than expected

Sales rise 8.6% at discounters, 3.7% at department stores, 2.9% at apparel sellers and 6.2% at teen apparel chains in September, compared with a year earlier.

October 06, 2011|By Andrea Chang, Los Angeles Times
  • People shop at a Macy's store in West Covina. Macys CEO said sales trends were strong in stores and online at Macys and Bloomingdales.
People shop at a Macy's store in West Covina. Macys CEO said sales trends… (Irfan Khan, Los Angeles…)

Consumers responded to deep discounts and the final weeks of back-to-school shopping by spending heavily at the nation's retailers in September, reflecting a surprisingly upbeat shopping mindset heading into the holiday season.

Despite an otherwise sluggish economic outlook, major chain stores posted a better-than-expected 5.1% year-over-year rise, according to Thomson Reuters' tally of 23 large retailers released Thursday.

"The general disconnect between U.S. retailers … and broader weakness in the global economy continued in September," said Ken Perkins, president of research firm Retail Metrics Inc.

Like many Americans, Simon Boyce-Maynard, 36, lost his job recently. The computer engineer from Canoga Park is now working for a start-up company, making a fraction of his previous salary. But that hasn't stopped him from making a few impulse purchases lately, including two Sony televisions and a $200 toy helicopter.

"I still buy things that make me happy," he said at Westfield Culver City this week. "Family-wise we are cutting back, but we're not acting as if it's the end of the world."

Amid lingering worries about high unemployment, a stagnant housing market and Wall Street volatility, shoppers have remained resilient, but cautious, when it comes to spending.

Santa Monica resident Meredith Soffa said she spends only when she needs to, which is often.

"I have two kids and they're constantly growing, so I'm constantly buying new clothes for them," the nurse, 34, said while shopping at Target. "It got cold, so none of their clothes from last year fit."

All told, 60% of chains beat expectations in September. Sales rose 8.6% at discounters, 3.7% at department stores, 2.9% at apparel sellers and 6.2% at teen apparel chains; all of those sectors performed better than expected.

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 store openings and closings.

The month's top performers reflected a mix of retail categories. Leading the pack was Costco Wholesale Corp., which reported a 12% rise. Apparel seller Limited Brands, parent to the Victoria's Secret and Bath & Body Works chains, said sales rose 11%. Upscale department store Nordstrom Inc. posted a 10.7% rise and teen retailer Zumiez Inc. saw sales increase 10.1%.

The worst results came from struggling apparel giant Gap Inc., parent to the Gap, Banana Republic and Old Navy chains, which posted a 4% decline. The San Francisco company has repeatedly posted soft sales this year amid criticisms that its clothing isn't resonating with shoppers.

J.C. Penney Co. posted a 0.6% decline, and teen retailer Wet Seal Inc., based in Foothill Ranch, said sales slipped 0.3%.

Retailers are now looking ahead to the start of the holiday season, the most important time of the year for the industry. Several chains said Thursday that they were well prepared for the upcoming Christmastime rush and thought recent momentum would help carry them through the final months of the year.

Terry J. Lundgren, chief executive of Macy's Inc., said that sales trends were strong in stores and online at Macy's and Bloomingdale's and that shoppers were responding to "fashion and uniqueness." The department store giant said its September sales rose 4.9%.

"This underscores that our business remains on track, despite the persistently negative macroeconomic news," Lundgren said in a statement. "We are feeling quite confident that we will continue to gain market share as we head toward the holiday selling season."

Separately, Los Angeles clothing maker American Apparel Inc. said Thursday that its third-quarter sales rose to $141 million, up 5% from the same quarter last year. At stores open at least a year, sales were up 3%.

"As we enter what is historically our strongest quarter of the year, we are optimistic that if current sales trends continue, we will continue to see substantial improvement in our overall financial performance," Chief Executive Dov Charney said in a statement.

The National Retail Federation is taking a more muted position, predicting that sales will rise a modest 2.8% to $465.6 billion for the November and December period compared with the same period in 2010. Many retailers make between 25% and 40% of their annual revenue during those months.

In a call with reporters Thursday, Matthew Shay, the trade group's president, pointed to the stalled economy and "painfully slow" recovery as factors that could hamper holiday sales.

"Retailers have a very strong understanding of some of the potential challenges of this season," he said. "It's a holiday season that's going to be filled with a series of promotions, cascading one after another continuing all the way to Black Friday."

Evie Hutton, 27, has cut her spending lately because she's had difficulty finding work as a musical theater actress. She went to Westfield Culver City this week with a friend but said she was there to buy only one item.

"I need a sweatshirt, and I need to find one for $20 or less," the Venice resident said. "Honestly, that's my wiggle room for the month."

andrea.chang@latimes.com

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