Tags: US | Retail | Sales

Discounts Spur Surprising Aug. Retail Sales Gains

Thursday, 02 Sep 2010 08:45 AM

Many retailers are reporting surprisingly solid gains for August, helped by aggressive discounting, even as unusually hot weather and job worries kept a lid on back-to-school buying.

The results are providing a sliver of hope for the economic recovery, but worries still remain about the critical holiday season.

Costco Wholesale Corp. posted a robust gain Thursday, boosted by higher gas prices and improved international revenue. Limited Brands Inc. and Macy's Inc. also had solid revenue increases.

But shoppers are still keeping to their lists, hurting a number of clothing stores such as Aeropostale Inc. and Gap Inc. Target Corp.'s results came in below expectations.

The figures still mask underlying weakness in consumer spending, because they're being compared with a weak August 2009. They're based on revenue at stores open at least a year, considered a key measurement of retailer health because it excludes the effects of stores that open or close during the year.

Still, the figures provide some comfort amid an unrelenting batch of bad economic news, including slumping home prices and high joblessness, that have all pointed to a stalling economy.

"It's a glimmer of hope that the numbers are coming in ahead of low expectations," said Ken Perkins, president of research firm RetailMetrics. "But it took retailers being heavily promotional to bring shoppers in. There's still serious concerns about the consumer's ability to spend during the crucial November and December periods."

Retailers, including many teen merchants, aggressively promoted jeans and other fashions in July as they sought to lure jittery shoppers in the stores. Tax-free holidays in nearly 20 states also helped attract customers. But still shoppers remained selective about buying for back-to-school as they worry about a faltering economy. They're also buying items closer to when they need them, analysts say.

The Conference Board's monthly survey, released Tuesday, showed shoppers feeling slightly more optimistic in August than July -- but not more than a year ago. And there's no reason in sight for them to feel better soon.

Home sales are plunging, and consumers are saving more and spending less as the unemployment rate remains stuck at almost 10 percent. The Labor Department is expected to report the fourth straight month of tepid job gains in the private sector on Friday.

"Consumers are buying what they absolutely need and are being very careful about it," said retail consultant Emanual Weintraub.

Costco said that revenue at stores open at least a year increased 7 percent in August, buoyed by higher gas prices and improved international revenue.

This topped the 4.2 percent rise analysts expected, according to by Thomson Reuters. But fourth-quarter and full-year revenue missed Wall Street expectations.

Target said sales of back-to-school items and food helped revenue in stores open at least a year rise 1.8 percent in August. But the discount retailer's results fell just short of expectations for a 2 percent increase. Food, health care and beauty items were the strongest sellers. Electronics and home decorations were weaker.

Limited, operator of Victoria's Secret and Bath and Body Works, posted a 10 percent gain in August. Analysts surveyed by Thomson Reuters, on average, expected the figure to rise 7.3 percent.

Gap said its key sales figure rose was flat in August, helped by better results at its Banana Republic chain. That's better than the 0.2 percent decline expected by analysts polled by Thomson Reuters.

Among department stores, Macy's said revenue rose in August as back-to-school shopping helped the company top Wall Street forecasts.

Revenue from locations open at least a year rose 4.3 percent during the month. That's better than the 4 percent gain expected.

J.C. Penney Co. had a 2.3 percent increase, better than the 1.6 percent gain. Overall, men's and children's apparel were the top performing merchandise divisions during the month.

Among teen retailers, Aeropostale Inc., hurt by the aggressive discounting at competitor Abercrombie & Fitch Co., struggled with a 1 percent decline, missing analysts' expectations of a 1.2 percent gain. The company said it had better results in peak back-to-school regions, showing shoppers are buying more close to when they need the items.

Abercrombie reported a 6 percent increase, slightly ahead of analysts' estimates for a 5.9 percent gain. But what helped drive business was a generous 40 percent discount, analysts say.

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Many retailers are reporting surprisingly solid gains for August, helped by aggressive discounting, even as unusually hot weather and job worries kept a lid on back-to-school buying. The results are providing a sliver of hope for the economic recovery, but worries still...
US,Retail,Sales
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2010-45-02
Thursday, 02 Sep 2010 08:45 AM
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