By  on September 14, 2010

WASHINGTON — Strong back-to-school shopping and heavy discounting helped propel slightly better-than-expected retail sales in August.

But sales were uneven and illustrated how sluggish the economic recovery is. Retail apparel sales increased in August compared with July, while in yearly comparisons, specialty store receipts increased and department stores struggled to top last year’s sales levels.

“The consumer is not functioning on all cylinders,” said Kevin Regan, senior managing director and retail industry expert with FTI Consulting.

Consumers responded to enticements such as promotional pricing and tax holidays in August that helped spur additional shopping alongside seasonal b-t-s purchases, but they are still very cautious, Regan said.

Sales at clothing and accessories stores rose 1.2 percent to $18.3 billion last month compared with July, while department store sales advanced 0.4 percent to $15.5 billion, the Commerce Department reported Tuesday. In 12-month comparisons, specialty store sales increased 3.9 percent, while department store sales fell 1.2 percent. Sales at general merchandise stores, which include department stores and discounters, rose 0.4 percent to $50.9 billion compared with a month earlier and advanced 3 percent year-over-year.

Sales of all goods and services were up 0.4 percent to $363.7 billion in August compared with July, marginally better than analysts predicted. Sales advanced 3.6 percent compared with a year earlier.

“If there was a silver lining in August, it was that consumers flocked to back-to-school promotions in far greater numbers than they did a year ago,” said Sandy Kennedy, president of the Retail Industry Leaders Association.

Despite some positive signs that consumers are cautiously spending, experts said the economy still isn’t fully back on track.

“While the underlying trends remain positive, shoppers are still focused on getting their finances in order,” said Jack Kleinhenz, chief economist for the National Retail Federation. “The challenge for retailers is to convince consumers that the recession is over and to buy accordingly.”

The current economic climate is likely to be categorized by long periods of flat sales “interrupted by bouts of seasonal buying,” said Steve Blitz, senior economist with Majestic Research.

“August retail sales data confirm the pattern in evidence throughout the year: consumers buying when necessary, just not as a leisure-time activity,” Blitz said. “Tales of a double-dip [recession] are overdone, but so, too, are any notions that today’s report signifies that the consumer is back, ready to lead the recovery from here.”

Looking ahead to the upcoming holiday season, tougher year-over-year comparisons toward the end of the year could impact sales results, FTI’s Regan said.

The August sales gain helped retail stocks outshine the market.

The S&P Retail Index advanced 1.2 percent, or 5.20 points, to 436.46, the index’s fifth consecutive positive session. Among the day’s top retail gainers were Chico’s FAS Inc., up 9.2 percent to $9.88; J.C. Penney Co. Inc., 7.4 percent to $23.99, and AnnTaylor Stores Corp., 5.7 percent to $18.33.

After four straight positive sessions, the Dow Jones Industrial Average fell 0.2 percent, or 17.64 points, to 10,526.49. International markets were also relatively quiet , with the Nikkei 225 falling 0.2 percent in Tokyo and the DAX rising 0.2 percent in Frankfurt.

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