- The Washington Times - Thursday, October 6, 2005

NEW YORK (AP) — The outlook for the holiday shopping season grew murkier yesterday as September sales results from the nation’s big retailers suggested that consumer anxiety about the economy is growing.

Discounters like Wal-Mart Stores Inc. had a solid month as Americans struggling with higher gasoline prices and the economic fallout from Hurricane Katrina shopped for basics. But results were disappointing at mall-based apparel stores including Gap Inc., Ann Taylor Corp. and Talbots Inc.

The question now is how generous will shoppers be during the holiday season.

“Uncertainty is always bad for retailers,” said Michael P. Niemira, chief economist at the International Council of Shopping Centers. “And that uncertainty did not vanish with today’s reports. We have the same worries about gasoline prices, home heating and the sustainability of consumer demand.”

Mr. Niemira added that the only certainty is that the broad retailing trend hasn’t changed — teen retailers and high-end stores continue to do generally well while the rest of the industry struggles.

The International Council of Shopping Centers-UBS sales tally of 71 retailers rose a better-than-expected 4 percent in September, about the same pace merchants have seen all year, but Mr. Niemira warned that the sales figures don’t tell the whole story. The tally is based on same-store sales, or sales at stores open at least a year.

“Overall, the numbers look OK on the surface, but they mask a lot of the story line, and the story line is probably not as positive as the numbers look,” he said. “It is a very mixed reading.”

Richard Hastings, senior retail analyst at Bernard Sands LLC, expects that this holiday season will be the most heavily discounted since 2002 as merchants try to woo uneasy shoppers.

“We are starting to see some cooling off of the overall consumer attitude,” he said.

Clearly, consumers had much to deal with in September.

Consumers who were already juggling their budgets because of the higher cost of gasoline had to contend with prices that soared past $3 a gallon. And the two hurricanes, particularly Katrina, have led to hundreds of thousands of job losses, making people across the country uneasy about the economy.

Last week, the Conference Board said consumer confidence suffered its biggest drop in 15 years in September. There have been other fresh government data pointing to a slowing economy.

Amid such worries, several retail forecasts predict only modest growth for the holiday season from last year.

The National Retail Federation project holiday sales, which encompass November and December, to rise 5 percent, less than the 6.7 percent gain in 2004.

According to a survey of about 2,100 consumers, conducted by NPD Group Inc., a market research firm in Port Washington, N.Y., shoppers plan to spend $681 this holiday season, slightly more than the $655 they spent last year.

Wal-Mart, which had seen its sales slow amid higher gasoline prices for months, had an easier time in September. The world’s largest retailer had a 3.8 percent increase in same-store sales, matching the consensus forecast of analysts surveyed by Thomson First Call.

September’s business was boosted by post-hurricane demand for such staples as canned food, water and cleaning supplies and by higher-than-anticipated sales at its Sam’s Club division because of higher gasoline prices. Many warehouse clubs sell gas.

The retailer said the effect of the hurricanes on the third quarter will reduce profits by about a penny per share, but it is still sticking to its projected range of 55 cents to 59 cents.

Rival Target Corp. had a 5.6 percent gain in same-store sales, better than the 4.9 percent estimate.

Costco Wholesale Corp. reported an 11 percent increase in same-store sales, helped by the rise in gas prices. Excluding the effects of gas price inflation, same-store sales would have been up 8 percent. Analysts expected a 6.7 percent gain.

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