Shoppers make up lost ground

By | Friday, September 7, 2007

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NEW YORK (AP) — Consumers undeterred by escalating credit problems and a weakening housing market went on a back-to-school buying spree last month, helping many retailers rebound from July's disappointing sales.

As the nation's retailers reported better-than-expected sales results yesterday, winners crossed all sections of the industry and included Wal-Mart Stores Inc., Target Corp., Pacific Sunwear and Saks Inc.

"When you look at August, there was a lot of doom and gloom," said Chris Donnelly, a partner in the retail practice at the consulting firm Accenture, referring to reports of growing numbers of mortgage defaults and financial market turmoil. "But consumers were out there spending. ... Back-to-school sales were good."

As Mike Schenk, senior economist at the Credit Union National Association, put it, "It's surprising, but shoppers are shopping. The question is, when are they going to drop? We really are expecting people to take a step back."

According to the UBS-International Council of Shopping Centers tally of 47 stores, August results were up 2.9 percent, compared with the 3.8 percent gain in the year-ago period. The tally is based on same-store sales, or sales at stores open at least year, considered a key barometer of a retailer's health.

The August results are slightly better than the 2.6 percent pace seen in July, but the tone of the retail reports dramatically improved, said Michael P. Niemira, chief economist at the International Council of Shopping Centers, who expected no more than a 2.5 percent gain.

Last month's business was boosted by a shift in a tax-free sales week to August in two critical states, Florida and Texas. Cooler weather in the Northeast and Mid-Atlantic regions also aided sales of fall fashions.

Analysts will closely watch September sales to get a better read on the consumer's ability and willingness to spend, especially with the holiday shopping season coming up. Many retailers hope to make up to half their annual sales during the fourth quarter.

Wal-Mart, the world's largest retailer, posted a 3.1 percent increase in same-store sales, helped by strong sales of back-to-school items. Rival discounter Target also posted strong results, turning a 6.1 percent gain in same-store sales.

Luxury stores again did well as shoppers splurged on status handbags and other expensive items. Saks Inc. reported a robust 18.2 percent gain in same-store sales, while Nordstrom Inc. posted a 6.6 percent gain.

Teen retailers scored a strong rebound from sluggish results in July. Wet Seal Inc. reported a 1.7 percent gain in same-store sales, Abercrombie & Fitch had a 6 percent gain, and Pacific Sunwear posted a 9.6 percent gain.

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