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Major retail chains post tepid sales gain

Major chains post a 0.8% increase in retail sales in September compared with a year earlier, ahead of what are expected to be strong holiday-season sales.

October 05, 2012|By Shan Li, Los Angeles Times

After splurging on back-to-school clothes and supplies, shoppers took a break from the malls in September in advance of what is expected to be a solid holiday season.

Rising home sales and a rallying stock market have boosted consumer confidence and willingness to shop, industry experts say. Analysts point to the past months of steady sales as a sign that consumers will hand retailers a healthy boost in November and December.

"The holiday season will be a solid success but won't have numbers off the charts," said Barbara Kahn, business professor at the University of Pennsylvania.

Shoppers on the prowl Wednesday said they expect to spend a bit more during the holiday season compared with recent years. But most are still cautious about their finances and will keep an eye out for good deals.

"I bought four pairs of jeans recently; I didn't shop for fun stuff for so long that it became a necessity," said Crystal Gaskill, 34, who finally landed an executive assistant job in September after three years of unemployment. She was shopping in Beverly Hills. "My first paycheck went to bills, and the second paycheck went to fun."

Major chains posted a 0.8% increase in retail sales in September compared with the same month last year, below analysts' expectations of a 1.6% rise, according to Thomson Reuters' tally of 19 retailers.

The discount sector had a strong showing. Costco Wholesale Corp. reported a 6% gain in sales. TJX Cos., parent company of T.J. Maxx and Marshalls stores, also saw 6% growth. Off-price retailer Ross Stores posted a 5% increase.

Clothing giant Gap Inc. continued its turnaround strategy and saw revenue rise 6%.

Other retailers posted weak results. Struggling teen clothier Wet Seal, which is fending off efforts by an activist shareholder to remake its board after more than a year of falling sales, reported its sales dropped 12.7%.

Target Corp. which posted a 2.1% increase, said it would stop reporting monthly sales at the start of its 2013 fiscal year, which begins Feb. 3. Many retailers, including Wal-Mart Stores Inc. and J.C. Penney Co., have stopped reporting monthly figures.

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.

September is traditionally the last month of back-to-school shopping, the second-most-important time of the year for retailers (after the winter holidays), accounting for more than 10% of the industry's annual sales. Some retailers see 40% or more of their annual sales come in during the last two months of the year.

Looking ahead, analysts are split on whether the holiday season will be on par or better compared with last year.

The disagreement is spurred by mixed economic data. Payroll processor ADP said this week that private companies beat expectations by adding 162,000 jobs last month, while the Conference Board has reported that consumer confidence in September jumped to the highest level since February.

But the National Retail Federation, an industry trade group, said Tuesday that it expects the combined November and December shopping period to grow slower than in the last two years, with a 4.1% increase. National unemployment numbers for September will be released Friday.

"The word right now is cautious optimism for what consumers are looking at: They look at job prospects, they look at a rising or at least stable stock market," said Bruce Cohen, a retail strategist at the private equity practice of management consultant Kurt Salmon. "The general spirit is that expectations going forward will be more favorable."

But Cohen cautioned that economic foundations are still shaky and bad news could influence shoppers.

"It could slip in some months or increase in some months," he said. "Consumers are still cautious about what's going on."

Retailers are adapting to the presidential election next month, which will be preceded by heavy advertising on TV, by pushing back some marketing campaigns until after voting concludes, said Michael Brown, a partner in the retail practice at management consulting firm A.T. Kearney.

Brown forecasts a positive holiday season with a 3% to 4% rise in sales.

"We will also see retailers using planned promotions to draw customers in from Black Friday up to Christmas," he said.

Such discounts probably will attract Alyssa Tamayo, a 23-year-old nanny who plans to go back to school full time and has to budget accordingly for the holiday season.

"I have more confidence in the economy," the South Bay resident said. "But I'm not so confident about my own finances."

shan.li@latimes.com

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