August sales reveal caution of consumers


A shaky economy and cautious consumers held retail sales in check last month, leading many of the nation's largest retailers yesterday to report disappointing figures for the back-to-school shopping period.

Department stores and apparel chains were hit hardest. Sears, Roebuck and Co., Federated Department Stores Inc., and May Department Stores Co. all posted sales drops last month at stores open at least a year.

Specialty chains such as Gap Inc. and Abercrombie & Fitch also reported declines.

"Apparel retailers did terrible," said Kurt Barnard, president of Barnard's Retail Consulting Group in Upper Montclair, N.J. "People weren't spending their money in August. ... [Retailers] are dealing with a cautious and very concerned consumer."

Analysts and economists have credited strong consumer spending with keeping the economy afloat after the terrorist attacks of Sept. 11 and the economic downturn. But with the latest round of retail sales figures, many see greater caution among consumers.

"I think consumer spending is slow and probably going to stay slow going into the holiday" shopping season, said Robert F. Buchanan, a vice president and retail analyst with A.G. Edwards & Sons in St. Louis.

"The stock market is getting to the consumer," he said. "People are getting 401(k) statements showing 20 percent less than what they used to be and throwing up their hands and saying, 'Enough is enough. I'm cutting back on spending.'"

In its monthly survey of 76 major chains, Bank of Tokyo-Mitsubishi said sales last month at stores open at least a year grew 1.6 percent. In August last year, sales at such stores grew 3.6 percent.

"The numbers came in pretty much as expected: weak," said Michael P. Niemira, an economist with Bank of Tokyo in New York.

Niemira said chain retailers' performance was influenced by hot weather that lessened demand for fall clothing and by incentives offered by auto dealers, which lured consumers into showrooms to spend on cars instead.

"In the context of the broad story, consumption is still holding up because automotive is still strong," Niemira said.

"Consequently, there may be some pent-up demand that may be forthcoming in September" for retail chains.

Discounters such as Wal-Mart Stores Inc. and Target Corp. were also crimped by consumers' caution. Both posted monthly sales results below Wall Street's expectations. Target's same-store sales fell 0.1 percent. Wal-Mart, including its Sam's Club segment, posted a 3.8 percent gain.

Though back-to-school clothing sales were weak last month, retailers are hoping that demand will pick up this month as the weather cools off, analysts said.

Lori Wilking, a retail analyst with H&R; Block Financial Advisors in Detroit, referred to it as the "buy now, wear now" mentality.

"As temperatures begin to drop, some of the first markdowns of the season will be taken, and I think you'll see people come back into stores to pick up those light sweaters they weren't getting in August," Wilking said.

Barnard said the trend over the past two to three years has seen consumers buying "closer and closer to need" when it comes to back-to-school shopping.

"It's entirely possible that September will see a flurry of back-to-school sales," Barnard said.

J.C. Penney Co. Inc. and Kohl's Corp. were among the few bright spots in the department store sector. Penney, excluding its Eckerd drugstore chain, posted its second consecutive month of positive growth, with a 2.9 percent increase in same-store sales. Its total sales were up 1 percent. Kohl's continued to lead its peers, posting a 4 percent increase in same-store sales.

Sears' same-store sales fell 11.1 percent last month. May's sales were down 8.6 percent, and Federated's declined 5.8 percent.

"People are just becoming more cost-conscious," said Wilking. "They're beginning to watch their trips to the mall."

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