Tax-free holidays, eye-catching promotions and fresh back-to-school inventory gave consumers an excuse to shop last month — and shop they did, giving a nice boost to the back-to-school season.
But recession-weary analysts remain cautious about holiday and it’s not clear how much profit margin retailers had to give up to draw shoppers into stores with price cuts. And despite the strong showing in August, the S&P Retail Index fell 0.5 percent, or 2.98 points, to 646.50 Thursday on a down day for the market.
According to the International Council of Shopping Centers, August sales rose by 6 percent, which was higher than the 3.5 to 4.5 percent growth it expected. That momentum came off of July’s sound 4.6 percent increase. RELATED STORY: August Comps Crux >>
Even so, retailers might be better off erring on the side of caution. The ICSC anticipates a deceleration in September in the form of a 3 to 4 percent comp gain.
Taking it a step further, Daniel Farmer, principal in the retail practice at A.T. Kearney, added that it’s too early to draw any sweeping conclusions about the strength of retail — much less holiday — based on the solid b-t-s season.
“We’re seeing a decoupling of holiday and back-to-school,” Farmer said. “It’s pretty difficult to see how it’s a predictor of holiday.”
The analyst said the month’s sales were aided by better weather conditions and more aggressive discounts.
“Retailers saw traffic wasn’t coming in so they ramped up promotions in July,” he said, adding that while most chains were able to get rid of excess inventory, teen retailers still likely have too much.
While that is partially linked to teen shopping habits — teens tend to revamp their wardrobes after they see what their friends are wearing — it also has to do with increasing gas and food prices. Older teens may be sensitive to those price increases, but waiting to shop in September might also give retailers a bit of a boost next month, Farmer said.
“The momentum seems to be fairly neutral in retail,” added Michael McNamara, vice president of MasterCard Advisors SpendingPulse. “It seems like consumers will spread their budget around differently, depending on the month. People are picking places where they spend.”
Although McNamara said his company, which provides research data on consumer spending, saw an 8.7 percent pickup in women’s apparel this August over last August, it’s premature to “pop the Champagne.”
“I would be cautious to look at some of [August comp] numbers and project into holiday season,” he said. “There are macro factors that aren’t front of mind that the [presidential] election will bring forward. You’re going to have a very different news cycle in November and December. This probably isn’t the kind of p.r. that the retailers are looking for during the holiday season.”
McNamara referred to the fiscal cliff issue that will face lawmakers at the end of the year and said that should get consumers thinking about their spending habits.
For the time being, McNamara pointed to the strength at retailers offering value — and great footwear.
With its strong footwear offering, Nordstrom Inc. posted a 21 percent jump in same-store sales in August.
While those high-flying results were due mainly to the shift of its anniversary sale into August, the retailer has seen strong growth throughout the downturn.
“We’re on a huge footwear rebound, which began last fall,” said Craig Johnson, president of Customer Growth Partners. “If you were to peel apart some of [August’s] numbers, footwear at Macy’s and Nordstrom has been stellar.”
Johnson also noted that apparel is on the rebound, as retailers are cycling in more colorful, hipster-inspired fashions, including funky patterned denim.
Some of those fashions are trickling into the Gap Inc.’s merchandise offering, and it’s paying dividends, as Old Navy, Banana Republic and the Gap posted comp increases of 12 percent, 8 percent and 9 percent, respectively.
The TJX Cos. Inc. and Ross Stores Inc., both with 8 percent comp increases, have also maintained a strong fashion offering at an accessible price.
“The consumer will shop for what’s compelling, but they want to see that they are getting their money’s worth,” said Kurt Salmon retail strategist Alden Lury, who noted that despite the economic troubles and political uncertainties, Americans are still consumers at heart.
“People like to shop and back-to-school gives them a reason to spend, even in the face of uncertainty,” Lury said. “It seems as though consumers are telling us that when they have an excuse, they’ll spend.”
"I was driving back on Saturday afternoon from the beach, and I just saw this sign saying 'Skydiving for $95.' And I was like, I can't not sky dive for $95," says Tom Bateman about a moment in Hawaii while shooting "Snatched." #wwdeye (📷: @vsteves; Interview by @ktauer; Styled by @thealexbadia)