Retailers delivered a late-summer surprise, with sales for the
key back-to-school buying month of August coming in better than
expected.
All retail categories produced sales that were ahead of muted
expectations, and also showed that some retailers may be pulling
ahead of ahead of the pack through the use of promotions, greater
efficiencies, products, or combinations of all.
Target Corp. (TGT), which has been adding grocery items to its
stores, reported a 1.8% gain in same-store sales for the month. The
figure slightly missed analysts' expectations but was, the company
said, in line with its own projections. Target said customer
traffic was healthy throughout the month and that apparel and food
offerings did well. Target has been posting positive monthly
same-store sales as its major rival Wal-Mart Stores Inc. (WMT),
while no longer reporting on a monthly basis, has posted five
straight quarters of declines in U.S. comparable-store sales.
Macy's Inc. (M) appears to be getting a leg up on its
department-store peers. The retailer's 4.3% gain in same-store
sales was ahead of projections for a 4% rise and Chief Executive
Terry Lundgren gave credit to the company's shift to tailoring
merchandise to local tastes and more centralized operations that
allow quicker decisions. He also cited strong reception to
merchandise such as the new Madonna-inspired Material Girl line.
Macy's "market-share gains are apparent," said Kenneth Stumphauzer,
retail analyst at Sterne, Agee & Leach.
Kohl's Corp. (KSS) also has a solid showing, with a 4.5%
increase in same-store sales, when 2.6% was projected. All regions
and all lines of business were positive for the month, with home
goods, men's merchandise and footwear doing particularly well,
Chief Executive Kevin Mansell said.
J.C. Penney Co. (JCP), which some analysts feel is losing share
to Macy's and Kohl's, had the smallest same-store sales gain of the
three department stores, showing a 2.3% rise that nonetheless beat
analysts' expectations for a 1.6% gain.
Two major upscale department stores took divergent tacks last
month, as a rocky stock market created jitters among the affluent.
Nordstrom Inc. (JWN) posted a 6.3% rise in comparable-store sales,
ahead of projections for 5.9%. Saks Inc. (SKS) reported a 1% gain
when 4.3% was expected.
The big teen retailers fought a heavy battle of promotions
during the month, and Abercrombie & Fitch Co. (ANF) appears to
have been one of the victors. The company's same-store sales rose
6%, when a 5.9% advance was expected by analysts. The showing
compares with a 29% drop last year, when Abercrombie was holding on
to its "no discounts" strategy.
Fellow teen retailer Aeropostale Inc.'s (ARO) same-store sales
fell 1% for the month, compared with expectations for a 1.2% rise
and a 9% gain a year ago. The company said it "experienced stronger
results in its peak back-to-school regions, reflecting a customer
that is shopping closer to need."
American Eagle Outfitters Inc. (AEO), another teen destination,
reported a 1% comparable-store sales gain when analysts' projected
a 1.1% rise, and backed its earnings view for the current
quarter.
In the race for market share, pumping up sales at stores open
more than a year is key, showing that the location has demonstrated
staying power and is likely a revenue contributor.
The 27 retailers tracked by Thomson Reuters posted a 3.3% gain
in same-store sales for August, ahead of the 2.5% rise that
analysts projected. The showing follows a 2.9% drop a year ago and
a 2.7% rise in July.
While sales are stronger, they remain below pre-recession
levels.
"We continue to see weak to modest growth, and it's hard to be
optimistic," said Mike Berry, director of industry research for the
SpendingPulse unit of MasterCard Inc. (MA). "We're still running at
levels well below two years ago pretty much across the board."
Two-thirds of the retailers that reported same-store sales beat
expectations, with mass merchants and apparel retailers doing so by
the widest margins.
"No matter how the economy is doing, back-to-school [shopping]
occurs each year and parents are budgeted for it," said Jharonne
Martis, retail analyst at Thomson Reuters. "The last week of August
was particularly strong."
The showing makes for a solid start to retailers' third quarter,
which for most begins in August. But retailers were very
promotional during the month, which could eat into their margins
and bottom lines.
Also, while the monthly figures are on a par with those posted
in the beginning of the year when people were starting to feel good
about the economy, retailers face more of an uphill climb in
September. They will be facing comparisons against positive
same-store sales results for the first time in a year.
Feelings of some despair helped retailers pull off a
better-than-projected showing, analysts said. "Things have been so
poor in terms of the economy and even the stock market, and that
really pulled expectations down," said Stephen Hoch, marketing
professor at the University of Pennsylvania's Wharton School.
"Also, last year was a very bad year, so that makes the numbers
look that much better."
In essence, "We're treading water on the retail front, and it
was thought that we couldn't even do that," Hoch said.
A number of factors led to muted expectations for August.
Shoppers received a spate of poor economic news during the month,
weathered extremely hot temperatures that took their minds off of
the autumn school start, and knew they had an extra week to wait
for sales because the U.S. Labor Day holiday falls later in
September this year.
-By Karen Talley, Dow Jones Newswires; 212-416-2196;
karen.talley@dowjones.com
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