By  on October 6, 2011

September comparable sales may have been better than expected, but weren’t spectacular enough to convince analysts that the holiday season is going to be anything but tepid.

That means the bitter battle for market share is expected to continue as retailers vie for the attentions of consumers amid the weak economy and high unemployment.

Overall, September sales were characterized by most analysts as “relatively strong” and driven by luxury spending and promotions as consumers sniffed out the best deals during the tail end of the back-to-school selling season.

Luxury sales rose 10.4 percent in September, driving total comps up 5.5 percent, according to the International Council of Shopping Centers, which was projecting an overall increase of 4 percent to 5 percent. In the luxe realm, Nordstrom Inc. comped up 10.7 percent and Saks Inc. logged a 9.3 percent increase for the month.

Investors, eager for any signs of hope, jumped at the sales results and pushed the S&P Retail Index up 2.1 percent, or 10.60 points, to 509.62. The Dow Jones Industrial Average rose 1.7 percent, or 183.38 points, to 11,123.33, and markets in Europe showed even stronger gains on a British plan to boost that nation’s flagging economy and efforts to shield European banks from the continent’s sovereign debt crisis.

But retail experts aren’t getting carried away with optimism and are keeping a wary eye on the upcoming holiday season.

“I am still a little bit concerned about underlying traffic weakness,” said Joel Bines, managing director at AlixPartners’ global retail practice. “In this environment, with higher prices, you wonder how willing people are to pay. I think we’re in for a very challenging holiday season with modest 2 to 3 percent growth — that’s basically keeping up with population growth.”

While Bines said most retailers are able to control their financial results by tightly managing their inventories, he noted that in order to drive traffic they are going to have to rely “heavily on early promotions.”

Mike Brown, a vice president at A.T. Kearney, said holiday results will hinge on how consumers react to Black Friday sales.

The winners are likely to stay the same, though.

“There has consistently been a group of retailers that have been able to follow what the consumer wants,” Brown said. “We know the consumer has been looking at opportunities to buy what they can at the best value and price and save their dollars for luxury purchases.”

That dynamic has helped the likes of Nordstrom, Saks, Macy’s Inc., Limited Brands Inc., Target Corp., The TJX Cos. Inc., Ross Stores Inc. and Costco Wholesale Corp.

It is no coincidence that, aside from Limited, which is known for its strong branding, those companies are either high-end players, department stores or value chains and not specialty stores.

“Broadlines and department stores are gaining share from specialty retailers,” said Citi analyst Deb Weinswig, adding that she sees a strong accessories trend, which spells danger for specialty stores, as department stores have a more complete offering of handbags, shoes and jewelry at a more affordable price.

What’s more, Weinswig said traffic is actually up at department stores and mass merchants, and that with falling gas and food prices, consumers felt like they were able to make purchases last month, which may account for the positive results.

Target turned in a 5.3 percent comp gain and told Weinswig it was “surprised” at its own robust sales results, despite its blockbuster Missoni sale. The analyst praised the retailer’s management team and credited it with improving its home goods offering, as well as for sewing up an upcoming collaboration with designer Jason Wu.

On the specialty side, some retailers held their own against department stores and mass retailers.

Zumiez Inc., Victoria’s Secret and The Buckle Inc. all reported double-digit comp increases, rising 10.1 percent, 13 percent and 10.3 percent, respectively, on robust promotions and innovative merchandise. In a preliminary report on results for the third quarter ended Sept. 30, American Apparel Inc. said comparable sales advanced 3 percent while net sales rose 5 percent as increased wholesale revenues offset the impact of store closures.

With little change in the macroeconomic picture, the question looming behind the better September results was: What’s driving consumers to spend?

Aside from pent-up demand, the fact that the unemployment rate is just 4.3 percent among those with a college degree versus a 14.3 percent unemployment rate for those without degrees might have something to do with it.

“If you look at the unemployment rate, it was spiraling out of control during the recession, but it hasn’t changed much in a year,” said Morgan Stanley specialty retail analyst Kimberly Greenberger.

That stability is key, Greenberger said, explaining that spending will “hold up” as long as consumers feel their jobs “won’t go away.”

“There are a lot of people in pain, but you have to keep in mind that there are 90-plus percent of us employed, and we have adjusted,” said Madison Riley, managing director of consulting firm Kurt Salmon, who noted that holiday will likely come late for retailers, as shoppers wait to make purchases.

This will make it harder for midtier retailers like the Gap Inc. and J.C. Penney Co. Inc., which are already struggling with merchandising issues, Riley said.

Gap’s U.S. namesake division saw comps fall 4 percent last month, as both the Old Navy and Banana Republic units comped down 1 percent. And Penney’s comps slipped 0.6 percent.

While there may be more certainty about the unemployment picture, even as bleak as it is, there are so many other variables that analysts said the one certainty about the holiday season is that it can be a surprise.

“Holiday is difficult to predict right now,” said A.T. Kearney’s Brown. “I think it is very rare that the North American consumer lets the economy get in the way of enjoying their holiday.”

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