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Big chains get a back-to-school revenue boost

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Stores report a 3.6% sales increase in August, helped by strong promotions

August 31, 2012|Shan Li
  • Retailers, anticipating an anemic appetite for school-related shopping, heavily focused on advertising promotions to increase traffic in August. Above, a shopper at the Beverly Center.
Retailers, anticipating an anemic appetite for school-related shopping,… (Kirk McKoy, Los Angeles…)

Shoppers hit the malls for back-to-school shopping in August and handed retailers a healthy boost in sales despite continued worries about the job market and a sluggish economy.

With many Southland schools already starting their fall terms and more opening in the next few weeks, retailers have aggressively pushed promotions to encourage shoppers to scoop up backpacks, clothes and notebooks. Analysts say brisk sales during back-to-school months are an encouraging sign for the upcoming holiday season.

Major chain stores posted a 3.6% sales increase in August compared with a year earlier, outpacing analysts' expectations of a 2% rise, according to Thomson Reuters' tally of 17 retailers.

"August was an excellent month for retailers," said Ken Perkins, founder of Retail Metrics Inc. "Back-to-school sales were really a driving catalyst to one of the highest sales increases we have seen in a year or so."

At the Beverly Center on Wednesday, many shoppers were stocking up on clothes and shoes for their fast-growing kids while keeping an eye out for discounts.

"We've gotten skinny jeans, T-shirts, shorts and tennis shoes," said Lauren Brown, 35, who was shopping with her two teenage sons. Even though Brown was laid off as a manager of commercial buildings in February, the Los Angeles resident said that her boys had outgrown their old clothes so shopping was a necessity.

"Luckily my sons have very reasonable tastes, and we go to places that have sales and just watch our budget," Brown said. "They can't go to school with too-small clothes."

Industry analysts say that cooler weather helped pull consumers into malls. Retailers, anticipating an anemic appetite for school-related shopping, heavily focused on advertising promotions to increase traffic. The Commerce Department reported Thursday that consumer spending rose 0.4% in July, the fastest pace in five months, after people enjoyed a 0.3% rise in income.

August has traditionally been the core of the back-to-school shopping period, the second-most important time of year for retailers. The period accounts for more than 10% of the industry's annual sales. But it also serves as an important first taste of how the holiday season -- a crucial time for many retailers -- may play out.

Retail experts say additional pressure on wallets may spur shopper anxiety for the second half of the year. Gasoline prices have been creeping up in the last few weeks, while a drought in the Midwest threatens to hike food prices. The Conference Board said consumer confidence fell this month to its lowest level since November of last year.

Despite a healthy August, "the economic factors will continue to indicate a tough season going right into the holiday season," said Daniel Farmer, a principal in the retail practice at consulting firm A. T. Kearney Inc. "If those factors hit consumer pocketbooks, you might see a bit of a pullback on spending."

Retailers that performed well in August were a mix of high- and low-end stores. Luxury department store chain Nordstrom Inc. led the way with a strong 21% jump. San Francisco-based Gap Inc. continued to show signs of a turnaround by posting a 9% increase. Discounters fared well, with off-price retailers Ross Stores Inc. and TJX Cos. both reporting a strong 8% increase. Limited Brands, parent company of Victoria's Secret and Bath & Body Works, also saw sales rise 8%.

Other retailers posted weak results. Struggling teen clothier Wet Seal, which recently ousted its chief executive and is facing a discrimination lawsuit, said sales plummeted 18.3%.

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 they exclude the effect of stores' openings and closings.

After kids and parents polish off their back-to-school shopping lists, retail analysts predict a lull in spending until close to Thanksgiving,

In a survey last week of 2,000 consumers, 61% of shoppers said their spending and confidence in the economy was pegged to the November presidential election, said Britt Beemer, chief executive of America's Research Group. Based on the survey, Beemer said retail sales would rise 3% if Republican presidential candidate Mitt Romney won and drop 2% if President Obama did.

"Christmas is going to be driven largely on who is going to be president of the United States," Beemer said. "It's an issue that is very important, especially for people working for small businesses."

But the elections aren't weighing on shopping decisions for Oksana Sendyk, 45, of Los Angeles. Sendyk, who used to work as an interior decorator but now lives off investments, said she plans to spend as much as $1,000 on clothes and furniture for her 15-year-old son Daniel, who is heading off to boarding school in Ojai.

"We haven't suffered in the last few years, so he's going to get whatever he needs for school," Sendyk said.

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shan.li@latimes.com

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