Retailers report solid gains for August
Thursday, September 1, 2011
NEW YORK (AP) — Americans kept shopping in August despite a month of bad news.
Besides old worries about the economy, shoppers had new troubles in August that could have kept them from heading to stores. They faced higher prices for food and clothes. Wild stock market swings fueled concerns about another recession. Then, Hurricane Irene hit in the middle of the important back-to-school shopping season.
Despite those factors, revenue in August among 26 retailers was up 4.6 percent at stores open at least a year — a key industry measure — according to the International Council of Shopping Centers. The gain is in line with the 4 percent to 5 percent that analysts predicted at the beginning of the month.
“Retailers weathered a number of storms to turn into what’s expected to be a solid back-to-school and August selling season,” said Ken Perkins, president of Retail Metrics, a research firm.
Retailers’ revenue results are closely monitored because consumer spending accounts for 70 percent of U.S. economic activity and is critical for a strong economy. Last month’s gains illustrate how consumers, though thriftier now, are willing to spend on essentials, especially for their children. In August, for instance, many bought clothes and supplies for their children, giving retailers a boost during the second-busiest shopping season of the year. Merchants are hoping the momentum will continue into the critical holiday shopping season.
“Consumers are looking beyond the noise and focusing on their own needs, and to some extent that is helping the retail sector and helping the economy,” said Michael P. Niemira, chief economist at the ICSC. “When you have so many of these events, the consumer seems to be de-sensitized.”
Jessica Wang, a 35-year-old mother of two children, ages 5 and 8, shrugged off stock market plunges and other worries about the economy throughout August, spending about $300 on back-to-school items. And even though she had a power outage at her home after Hurricane Irene, Wang plans to resume shopping on Thursday.
“We’re back in the saddle. My daughter is chomping at the bit,” the Bridgewater, N.J. resident added. “In my mind, we’ve been shopping under the cloud of the economy for a couple of years now. I had budgeted for back-to-school, and the crisis in the stock market doesn’t affect my spending.”
The results for August give a peek into consumers’ moods. But many retailers, particularly ones that cater to lower-income customers, do not report monthly sales. Among them, Wal-Mart Stores Inc., the world’s largest retailer. Still, the reports are seen as a hopeful sign since many big retailers posted strong results against the odds.
Luxury chains eased worries that wealthy shoppers would pull back because of stock market turmoil in August. Nordstrom Inc., for instance, had a 6.7 percent gain, higher than the 4.8 percent increase analysts had expected.
Other retailers, like Target Corp., posted solid results despite the economy as people shopped more for back-to-school supplies and hurricane-related items. Target’s revenue at stores open at least a year climbed 4.1 percent in August, topping Wall Street’s forecast of a 3.5 percent increase.
Target said its monthly results, which were helped by an increase in average transaction size, also got a boost of one-half of a percentage point as shoppers in the East headed to its stores to buy groceries and other goods to prepare for Irene.
“While the pace of the economic recovery is uneven and uncertain, we are confident,” said Gregg Steinhafel, chairman, president and chief executive officer of Target in a statement.
Even retailers that were hurt by some of the factors in August posted gains.
Macy’s Inc. closed more than 100 stores in affected areas, including its flagship store in Manhattan where the city’s public transportation system was closed ahead of Hurricane Irene. As a result, the company said August revenue was 1.5 percentage points lower than it would have been. Still, the retailer had a 5 percent gain in revenue at stores opened at least a year, above the 4.5 percent increase analysts were expecting.
“We expect the hurricane’s effect on sales will be substantially offset as we move through September and the third quarter,” said Terry J. Lundgren, chairman, president and chief executive in a statement.
Not everyone had gains, though. J.C. Penney Co. and Kohl’s Corp., both reported unexpected declines as shoppers continued to veer toward the higher- and lower-end retailers instead of those serving the middle-of-the-road customer.
Kevin Mansell, Kohl’s CEO, vowed Thursday that the chain is aggressively increasing its marketing and sharpening its pricing for the remainder of the fall season to “reverse the trend.”
Gap Inc., which had long been struggling with a sales malaise, said revenue at stores opened at least a year fell 6 percent. The declines were across all its brands, including its namesake stores, Banana Republic and Old Navy. It started e-mailing 50 percent discounts on women’s clothing to shoppers in the Northeast just for Thursday.
“Take a rain check. Something special for those who missed last weekend’s offer due to Hurricane Irene,” it beckoned.
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