Mass Retailers Ahead in August Comps

August same-store sales were marginally above expectations, with cash-strapped consumers pinching pennies by looking for bargains and spending more money at mass market discounters.

As a result, among the retailers tracked by WWD, the mass channel performed the best with a 2.4 percent increase in average same-store sales against a 6.4 increase the prior year. Specialty stores rose 2.1 percent on average versus 5.1 percent the prior year, and the department store sector was up 1.7 percent over 2.5 percent the previous year. Thirty-one out of 48 stores that reported this week were up over last year.

The deceleration in sales seen in July continued with two of the three sectors, department stores and specialty stores, dropping slightly from July comparable-store sales levels.

The chain store index tracked by the International Council of Shopping Centers increased 2.9 percent for August. The number did not include some chains, including drugstores, that will report next week.

“On a monthly basis, overall retail chain store sales continue to waver back and forth, with some months beating expectations while others [are] falling short. This month’s performance was near expectation and likely to be a bit stronger once the drugstore chains report their results,” said Michael Niemira, ICSC’s chief economist and director of research.

“August chain store sales confirm the slower growth trend that started in June 2006, and it should persist for many months to come,” said Richard Hastings, vice president, senior retail sector analyst, Bernard Sands, in a report.

But don’t discount consumer spending habits. “Consumers are consistently surprising us with both their resiliency and their desire to continue to spend. We’ve seen some slippage recently in consumer confidence numbers, but you’re not seeing that directly manifested in retail consumer spending,” said Chris Donnelly, partner in the retail practice at Accenture.

“It is always dangerous to bet against the consumer. As long as they have stable sources of income, consumers will make decisions about where they spend. Luckily for the economy, the irrational spending habits of the consumer will hold up under even the toughest of conditions …and we have a long way to go before it gets that tough,” said Hastings.

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Specialty stores continued to be the sector of the market most affected by this summer’s mixed sales results. American Eagle Outfitters, the Limited Brands, Bebe, Citi Trends and The Children’s Place were among the companies that stood out for the month, all posting comps over 10 percent.

After missing expectations in July, American Eagle beat predictions for last month. Its 11 percent comps increase was driven mostly by trend-right back-to-school offerings, including a planned denim push and the Web rollout of its new aerie lingerie subbrand, according to industry analysts. The company also cited a shift in tax-free holidays and a late start to the school year in some regions as factors. The company raised its third-quarter earnings guidance to 56 cents to 58 cents a share based on its August performance.

Citi Trends performed well last month due to a strong back-to-school start and good product offerings, according to analysts. The company reported a 13.7 percent increase in same-store sales for August against a tough comparison of 20.3 percent the prior year.

In the department store channel, Nordstrom’s comps gained 7.1 percent, Neiman Marcus was up 4.4 percent and Saks Fifth Avenue jumped 5 percent, proving that luxury customers are still spending. In its sales call, Nordstrom cited women’s, intimates, designer apparel and accessories as strong drivers of same-store sales; all categories outperformed the overall store.

In the midtier department store sector, results were positive, as well. Kohl’s gained 5.2 percent, while Federated posted a 3.8 increase in same-store sales over the prior year heading toward its Sept. 9 relaunch of the Macy’s brand.

“Our business remains firmly on track heading into one of the most important milestones in our company’s history,” said Terry Lundgren, chairman, president and chief executive officer, in a statement. “We look forward to the nationwide relaunch of the Macy’s brand on Sept. 9, when more than 400 former May Co. locations convert to the Macy’s nameplate.”

Some department stores faltered, though, including Bon-Ton, Dillard’s, Saks Department Store Group and Gottschalks. All posted declines.

While J.C. Penney’s same-store sales figures for last month were a slight disappointment, dropping 0.5 percent, industry observers remain impressed by the company’s performance lately. Still, companies such as J.C. Penney, which has its pricing and channel diversification in order, will continue to have a favorable outlook, Hastings said.

Overall, the mass merchant sector performed very well, with only one retailer, Stein Mart, reporting negative comps. Wal-Mart and Target both met their projections for August sales, up 2.5 percent and 2.8 percent, respectively. Target’s numbers were up against a tough comparison to last year, when its comps increased 6.3 percent. Target said on its sales result that the growth was due to an increase in the size of ticket. The growth was due mostly to perishables, toys and baby clothes. Women’s apparel, jewelry and accessories were among the worst comp-sale categories, according to the company’s sales call.

TJX Cos. exceeded expectations, with a 4 percent increase in same-store sales.

“Our August consolidated comparable-store sales increase of 4 percent exceeded our expectations, as we saw business trends pick up toward the end of the month,” said Ben Cammarata, chairman and acting ceo, in a statement.

Ross Stores’ 3 percent comp came in at the high end of expectations that the company revised downward.

“People are going to the mall right now and buying stuff. They’re just being selective about where they’re doing that,” Donnelly said.

“Compared with the first half of the year, sales have, on trend, moderated since June — a pattern that we are likely to see characterize the remainder of the year. For September, ICSC expects same-store sales to increased by 3 to 3.5 percent, on a year-over-year basis, as consumers’ wrap their back-to-school shopping,” Niemira said.

Moving forward, industry analysts said the same pattern of mixed results across the retail apparel sector is likely to continue, but some caution that the holiday season will be the true test of consumer willingness to spend.

“The overall group is showing signs of wear and tear resulting from shopper hesitation that is primarily the consequence of the dual impact of the decline of the house wealth effect and the continued impact of high gas prices. Back-to-school should remain on track for year-over-year growth, but there are bigger concerns about the holiday season based upon the chain-store sales trends and weak personal savings data trends,” Hastings said in a report.