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Retail Sales Topping Estimates, Despite Growing Caution

Amid slumping consumer confidence, shoppers remained resilient, and many retailers posted solid results for the month of September.

A man shops at the Abercrombie & Fitch store in the San Francisco Shopping Center in San Francisco, California.
David Paul Morris | Getty Images
A man shops at the Abercrombie & Fitch store in the San Francisco Shopping Center in San Francisco, California.

Helped by shoppers finishing up their back-to-school shopping and stocking up on fall apparel as the temperatures grew cooler, many retailers were able to outpace estimates.

This was encouraging for the economy, given that unemployment has been above 9 percent for more than two years, and news headlines about the U.S. budget deficit, European debt worries and a volatile stock market have given consumers little reason to spend more freely.

According to Thomson Reuters, U.S. retailers posted an average gain of 5.1 percent in sales at stores open at least a year, or same-store sales, outpacing the average analyst estimate, which called for same-store sales to rise 4.6 percent.

But the stronger-than-expected performance was driven by fueled by heavy discounting and retailers that had strong offerings for back-to-school, Retail Metrics President Ken Perkins cautioned.

"There remains a dichotomy between high-end chains, deep discounters and those who have product differentiation and retailers that cater to the middle market.

Stores such as Target, Limited Brands , Zumiez , The Buckle , and Macy's as well as high-end department stores JW Nordstrom and Saks were among those that beat Wall Street estimates.

However, JC Penney , Walgreen , Bon-Ton Stores and Stage Stores fell short.

Overall, however, the solid results helped end the back-to-school shopping period — the second busiest time on the retail calendar behind the Christmas holiday period — on a high note.

Although back-to-school sales are not a reliable indicator about how holiday sales will fare, it is more encouraging to head into the final months of the year on solid footing.

Earlier Thursday, the retail industry trade group the National Retail Federation released its forecast for holiday sales, and predicted a 2.8 percent gain for the season. While that gain is far less than the one posted last year, it is still a touch higher than the average holiday sales gain over the past 10 years.

At Target , the company said there was strong momentum at the end of the month with shoppers spending more at the store and more of the people purchasing items, rather than simply browsing.

Target posted a 5.3 percent gain in September same-store sales. The discount retailer said the gain was "somewhat" ahead of its own expectations.

Macy's posted a 4.9-percent gain in same-store sales.

"This underscores that our business remains on track, despite the persistently negative macroeconomic news," said Terry Lundgren, chairman, president and CEO of Macy's, in a statement. "We are feeling quite confident that we will continue to gain market share as we head toward the holiday selling season."

The luxury sector also appears to have fared well even in the face of declines in the stock market. High-income consumers tend to cut back on spending when the stock market falls, and spend more when it is rising.

Saks said same-store sales rose 9.3 percent, topping a 6.5 percent gain forecast by analysts, according to Thomson Reuters.

At Nordstrom , same-store sales surged 10.7 percent, well above the 5.2 percent estimate.

"American consumers continue to confound the Cassandra economists and their fears of a double dip recession. September’s solid retail sales. . .show that Americans — at least the 91 percent with jobs — continue to spend, strategically and savvily, but still unleashing pent-up demand from the recession,” Craig Johnson said, president of consulting and research firms Customer Growth Partners.

A summary of the results follows:

Same-Store Sales, September 2011

Retailers
September 2011 Estimates
September 2011 Actuals
Costco Wholesale 10.1% 12.0%
Target 3.9% 5.3%
JC Penney 0.6% (0.6%)
Kohl's Department Store 2.2% 4.1%
Dillards Department Store 3.3% 4%
JW Nordstrom 5.2% 10.7%
Saks Department Store 6.5% 9.3%
Stage Stores 0.3% (0.7%)
Macy's 4.4% 4.9%
Gap (3.8%) (4%)
TJX 3.2% 4%
Limited 4.6% 11.0%
Ross Stores 3.4% 5%
Stein Mart (1.5%) (1.7%)
Wet Seal 3.8% (0.3%)
The Buckle 3.8% 10.3%
Zumiez 3.2% 10.1%
Walgreen 4.6% 3.1%
Source: Thomson Reuters, company reports. Figures in parenthesis are losses.