Retailers Surprise With Strong August Sales

As children prepared to head back-to-school, consumers headed back to the stores and malls in August, boosting sales for a wide range of U.S. retailers.

Steven Senne

The strength of the latest sales reports extended from discount retailers Wal-Mart Stores and Target to teen retailers such as Zumiez and The Buckle, as well as high-end retailers such as Saks, and could go a long way in easing worries that consumers limit their spending amid the recent credit crunch.

The results also were markedly different from those in July, which were largely weaker than expected.

"It certainly looks like the final week and a half in August drove strong back-to-school apparel selling," said Ken Perkins, president of RetailMetrics, a research company in Swampscott, Mass., told the Associated Press. "But I am still concerned going forward. We still have all the macro headwinds."

August's results were helped in part by a growing trend among school to start classes later, delaying back-to-school purchasing. Still, a slumping housing market, the shrinking availability of credit and turbulent financial markets may still weigh on consumers, according to the New York-based Conference Board's report late last month.

Wal-Mart, the world's largest retailer, was oneof the retailers benefiting from the back-to-school trend. The Bentonville, Ark., retailer reported surprisingly strong sales in August and raised its outlook for September.

Wal-Mart said sales in stores open at least a year rose 3%, and were up 3.1%, excluding fuel.

Analysts, on average, were expecting the company's U.S. same-store sales to rise 1.5%, according to Thomson Financial. The company was estimating August same-store sales to rise between 1% and 2%.

"Back-to-school categories drove sales during the four-week August period at Wal-Mart Stores US. In the general merchandise area, back-to-school categories had solid sales performance, with strength in electronics, school supplies and children's apparel," the retailer said.

"Food categories were strong throughout the month and the back-to-school season helped drive convenience items for school lunch boxes and snacks."

For September, Wal-Mart now expects U.S. same-store sales to rise between 1% and 3%.

Wal-Mart was not alone in outpacing estimates. According to Thomson Financial, 67% of all have outpaced analysts' estimates. 

Among those was rival Target, the nation's second-largest retailer. Target said same-store sales in August rose 6.1%, compared with the average analyst estimate of 5% growth, according to Thomson Financial.

Perhaps one of the biggest surprises was that high-end retailers Saks and Nordstrom also were among those turning in big surprises. Analysts had expected consumers to cool their interest in luxury goods.

Saks, which operates upscale Saks Fifth Avenue, reported a robust 18.2% gain in same-store sales, beating the 9.2% estimate. The retailer reported strong sales of a wide array of goods, including shoes, apparel, and jewelry.

Meanwhile, Nordstrom turned in 6.6% same-store sales growth in August, slightly more than the 6.3% increase analysts had predicted.

Some of the department store results were skewed by shifts in the calendar. For example, J.C. Penney said late Wednesday its sales declined 4%, but that was a narrower decline than some had expected.

Meanwhile, Macy's outpaced its forecast with sales growth of 2.4%. The company had projected August same-store sales to be down 1% to up 2%. Macy's sees September sales down 1% to 3%, as the year-earlier period was aided by the company's nationwide launch of the Macy's brand.

Limited Brands had a modest 1% rise in same-store sales, below the 1.4 percent forecast.

Among teen retailers, Wet Seal reported a 1.7% gain in same-store sales, better than the 0.6% estimate.

Pacific Sunwear posted a 9.6% gain in same-store sales, surpassing the 0.9% forecast.

Retail Data

The strength of these results made a sales shortfall from warehouse clubstore Costco Wholesaleappear as an anomaly.

Many had viewed Costco's weaker-than-expected results, which were released on Wednesday, as a bad omen for this month's retail reports. The company's same-store sales increased 2% in August, while its same-store sales in the U.S. rose 2%.

Others with disappointing sales reports included Kohl's, Dillard's Department Store and Chico's FAS.

Kohl's same-store sales slipped 0.6%, compared with a Thomson Financial estimate of an increase of 2.8%. Although its back-to-school merchandise sold well, Kohl's said it saw weak demand for its home goods and men's and women's apparel. Sales were strong in the northeast, but sales were weak in the south and southwestern regions.

Dillard's said same-store sales fell 5% in August, hurt by weak sales in juniors', children's and men's apparel and accessories categories. Analyst surveyed by Thomson had called for a decline of 2.8%.