Retail sales sluggish as shoppers seek deals

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By Anne D'Innocenzio ASSOCIATED PRESS

NEW YORK | Many of the nation's retailers struggled with a sluggish back-to-school season, though Wal-Mart posted higher August sales Thursday, as shoppers focused on buying essentials amid worries about high gas and food prices.

As merchants announced their August sales results, Wal-Mart Stores Inc., the world's largest retailer, reported a solid gain that beat Wall Street forecasts. But mall-based apparel stores, like teen merchants Wet Seal Inc. and Abercrombie & Fitch Co., remained in the doldrums. And high-end retailers Saks Inc. and Nordstrom Inc. posted weaker results as their affluent customers start to feel pinched.

"Consumers are spending on necessities and looking for value and the lowest price possible. And it's reflective again in the results that we are seeing," said Ken Perkins, president of research company RetailMetrics LLC.

The International Council of Shopping Centers-UBS sales tally rose 1.7 percent in August, below the 2 percent forecast. Excluding Wal-Mart, the results were unchanged from a year ago. Last month's pace was below the 2.3 percent average since the beginning of the industry's fiscal year in February. The tally is based on same-store sales, or sales at stores opened at least a year, and are a key indicator of a retailer's health.

Michael P. Niemira, chief economist at the ICSC, thinks gas prices have to fall to $3 per gallon or below before shoppers will increase their spending. And even then, Americans still face other economic worries such as slowing personal income, higher food prices and a slumping housing market.

"The fall in oil prices is a bit of good news, but we need to see more positive economic news," Mr. Niemira said. He added that oil prices remain volatile. In fact, retailers are now getting ready for the next series of tropical storms, which could send oil prices back up.

Wal-Mart reported a solid 3 percent gain in same-store sales, helped by sales of groceries and back-to-school products. Including fuel, the retailer's same-store sales rose 3.5 percent.

Rival Target Corp.'s same-store sales fell 2.1 percent, though better than the 2.6 percent decline expected. The cheap chic discounter hasn't fared as well as Wal-Mart in the weak economy as Target heavily emphasizes nonessentials such as home furnishings and trendy jeans.

Another bright spot is warehouse clubs as shoppers buy in bulk to save money. Costco Wholesale Corp. posted a 9 percent same-store sales increase, though below the 9.6 percent estimate. Excluding the effect of higher gas prices, Costco's U.S. same-stores sales rose 6 percent.