Back-to-school sales give stores August boost

By Stephanie Clifford
New York Times / September 2, 2011

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Despite the volatile stock market, an East Coast hurricane, and predictions of delayed back-to-school purchases, Americans continued buying at a fast pace in August.

Sales at stores open at least a year rose 4.4 percent on average from August 2010, according to a Thomson Reuters tally of 23 retailers. That was 0.2 percentage points below analysts’ expectations but still a strong result.

“It bodes well for the balance of the year - the consumer has shaken off the craziness of Wall Street and the negativity coming out of Washington, and they’re buying,’’ said Madison Riley, managing director at Kurt Salmon, a retail consulting firm.

The companies with the biggest increases represented nearly every retailing sector. BJ’s Wholesale Club Inc. of Westford and Costco Wholesale Corp., both warehouse stores, posted same-store sales increases of 11.5 percent and 11 percent. Limited Brands Inc., a consistently good performer because of its Victoria’s Secret division, was also up 11 percent. The teenage-oriented store chain Buckle Inc. was up 8.3 percent, while Nordstrom Inc. rose 6.7 percent.

All five were also the biggest upside surprises, beating analyst estimates by the biggest margins among the stores reporting.

On the downside, Kohl’s Corp. and J.C. Penney Co., which have been heavily promoting back-to-school shopping, continued to have sales trouble. Both retailers posted same-store sales declines of 1.9 percent. Analysts had expected increases of 1.6 percent and 0.8 percent, respectively.

Earlier in the summer, analysts were predicting that back-to-school shoppers would postpone purchases until September as they waited for deals. But at most retailers, that did not seem to be the case.

“Part of the dynamic we see here is consumers had held off on a fair amount of spending in the last 18 months due to the economic situation. It’s pent-up demand, and it’s an important part of the retail year,’’ Riley said. “I don’t think they’ve put it off; I think they’ve gone ahead.’’

MasterCard Advisors’ SpendingPulse, which tracks spending at the retail level, said sales in back-to-school categories increased 3 percent in both July and August. “This is the best back-to-school season we’ve seen in terms of growth since 2006,’’ said Michael McNamara, vice president for research and analysis for SpendingPulse.

While luxury spending is usually correlated with the stock market over the long term, that is not always the case over the short term, as August showed.

In addition to Nordstrom’s gain, Saks Fifth Avenue’s same-store sales rose 6.1 percent. SpendingPulse did not release a percentage increase for luxury spending this month because of changes in how it reports data, but “the luxury trend throughout the summer has been one of the leading areas, and it continues to be through August,’’ McNamara said.

Still, analysts said that some lower-end stores have raised prices because of increases in cotton and other materials, but are having trouble getting shoppers to pay more.

“Thus far in the season, promotions appear to be deeper than last year, and inventory levels across the sector are growing faster than sales, which bodes poorly for successful price increases,’’ Adrienne Tennant, an analyst at Janney Capital Markets who covers apparel stores, wrote in a note to clients this week.

Hurricane Irene, which caused stores to close and shoppers to stay at home along the East Coast last weekend, seemed to have a light impact on sales. The retailers that quantified the impact of Irene on same-store sales said it had hurt sales by 0.6 percent (Penney) to 1.5 percent (Macy’s Inc. and Saks Inc.).

The more significant impact of Irene will be felt next month, Paul Lejuez, an analyst with Nomura Securities, said in a note to clients, because the beginning of this week, including Sunday, when many of the stores were closed, will be counted as part of the next period’s results.