With a generally positive back-to-school buying season under
their belts, retailers are now looking forward to the main event:
holiday shopping.
Buying in the back-to-school season, the second largest for the
year, finally kicked in in September, aided by plenty of
promotions, with most retailers posting same-store sales for the
month that were ahead of expectations and raising hopes for the
holidays.
Teen retailers, most vulnerable to the fall season, were joined
by department stores and general apparel retailers in producing
generally strong numbers.
The hope is that the next big buying event -- the holiday season
-- will produce the same kind of burst.
September's same-store sales results "are good news for the
holidays because there is typically a strong statistical
correlation between back-to-school and holiday sales," said Sarah
Henry, retail analyst at MFC Global Investment Management.
J.C. Penney (JCP) Chief Executive Myron "Mike" Ullman expressed
similar sentiment late last month, telling attendees at an industry
conference, "Obviously, back-to-school is equivalent to holiday for
the 'young businesses,' young men's, juniors and the kids
businesses."
Various projections have put sales gains for the holiday period
between 2% to 3.5%.
There also seemed to be some pent up demand in motion during
September, with some consumers doing a bit of splurging. Luxury
retailers Nordstrom Inc. (JWN) and Saks Inc. (SKS), coming off of
sales declines last year, reported growth that surpassed analysts'
expectations.
But, for luxury retailers still grappling with a sobered
customer base, the holiday gift-giving season may wind up being
mediocre. According to a new study by American Express Publishing
and the Harrison Group, affluent families are budgeting $2,093 on
holiday gifts this year, slightly less than last year. While 21% of
affluent families - defined as having a household discretionary
income of $100,000 or more - said they were cutting spending this
year, only 5% said they were planning on spending more, the study
found.
On the flip-side for September, discounters missed projections,
with Target Corp. (TGT) posting a 1.3% rise in same-store sales,
when a 1.9% gain was expected. The mass merchant did say it expects
initiatives like 5% discounts on credit card purchases to increase
its market share during the upcoming holiday season.
Off-price retailer TJX Cos. (TJX) just met expectations and BJ's
Wholesale Club Inc. (BJ) was below expectations.
By and large, the sales that retailers rung up in September came
at a cost, with the extremely promotional environment appearing to
have sparked extra buying. "Consumers remained highly value-centric
and purchased largely only with coupon in hand or because of
special offers," said Thomas Filandro, retail analyst at
Susquehanna Financial Group.
The discounting was especially acute among apparel retailers
that sell to teens, with Abercrombie & Fitch Co. (ANF), for
instance, saying that average prices were down 12% during the
month.
Several retailers, including Target, BJ's, TJX and Wet Seal Inc.
(WTSLA), noted that sales fell off after strength earlier in the
month. The slowdown could cause a pause in October before the
resumption of buying for the holiday season.
Retailers themselves continue to remain cautious. J.C. Penney,
while posting a 5.1% rise in sales at stores open at least a year,
when a 3.1% gain was expected, cited "the continuation of a highly
competitive promotional environment and ongoing volatility with
regard to consumer discretionary spending."
Among other department stores, Macy's Inc. (M) also exceeded
expectations, while Kohl's Corp. (KSS), which was the only
department store that showed sales growth the prior September, came
up a bit short.
Teen retailers turned in consistently better-than-expected
numbers, reflecting the later start to the season and the kinds of
promotions they were presenting. Some of the stores were offering
discounts on already marked down merchandise towards the end of the
month.
Zumiez Inc. (ZUMZ) and American Eagle Outfitters Inc. (AEO)
raised their-quarter earnings guidance after turning in strong
numbers. Among others in the group, Aeropostale Inc. (ARO) posted a
3% rise in sales when a 2.4% decline was expected, Hot Topic (HOTT)
posted a 2.6% drop, when a 3.5% decline was projected; and Wet
Seal's sales declined 0.7% when analysts were expecting a 2.3%
drop.
Limited Brands Inc. (LTD), which counts adults and teens among
its shoppers, smashed through estimates, posting a 12% rise in
sales when 4.1% was expected. The company's Victoria's Secret unit
led the upsurge, posting 13% growth, followed closely by Bath &
Body Works at 11%.
The 28 retailers tracked by Thomson Reuters ended up showing a
2.8% rise for September at stores open more than a year, beating
expectations for a 2.1% gain. Wal-Mart Stores Inc. (WMT) is not
included in the group.
Retailers as a group were up against the first positive
comparable store sales number in a year, when September 2009 showed
a 0.6% advance.
While the year-ago gain was small, there is still significance
in beating a positive number because it can supply a psychological
boost amid what is still a lot of downbeat sentiment, said Mike
Berry, director of industry research for the SpendingPulse unit of
MasterCard Inc. (MA). "Anything that can perhaps be viewed as
positive news can perhaps make a difference."
Still, "We're seeing a continuation of consumers buying close to
their needs, in this case back to school," Berry said.
-Rachel Dodes contributed to this article
-By Karen Talley, Dow Jones Newswires; 212-416-2196;
karen.talley@dowjones.com
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