Clothing sales wilted in August Apparel leads way in weak retail sector

September 03, 1993|By Michael Dresser | Michael Dresser,Staff Writer

The dog days of August bit U.S. apparel retailers hard last month as American consumers took an extended vacation from the malls.

Many retailers posted year-to-year declines in comparable-store sales, and for the clothing component, the month was a horror show.

The roster of companies that posted same-store sales drops reads like a who's who of apparel retailing: The Limited, Gap Inc., Ann Taylor, Neiman-Marcus, Merry-Go-Round and Charming Shoppes, which operates Fashion Bug stores.

The Bloomberg News Service's Composite Same-Store Sales index showed, however, that the month was not an unmitigated disaster for retail.

Overall, retail sales rose 3.38 percent in August compared with the same month last year, according to Bloomberg. Department stores gained a healthy 6.93 percent, while the discount stores index rose 2.98 percent.

But the specialty/apparel stores index fell 2.15 percent, indicating that a lot of students went back to school wearing their old clothes.

For some apparel chains, the month was an unmitigated disaster. Joppa-based Merry-Go-Round Enterprises posted a 16 percent decline in comparable-store sales, while Gantos Inc. dropped 13 percent and Charming Shoppes lost 8 percent.

Comparable-store sales, or sales at stores that have been open at least a year, are a more accurate gauge of a company's performance than are total sales, which are skewed by changes in the number of stores in a chain.

Except for specialty retailers, the figures were a mixed bag. Wal-Mart, the nation's largest retailer, could do no better than post a 4 percent gain -- a far cry from the days when it would reel off double-digit comparable-store sales increases in good months and bad.

Kmart, the nation's No. 2 retailer, was on its rival's heels, with a 3.4 percent gain in comparable-store sales.

It was one of the smallest spreads between the two companies in recent years.

The most noteworthy success was a re-energized Sears Merchandise Group, which recorded a 10.9 percent gain, for its third straight double-digit increase.

August's gain is probably the most meaningful of the three because it compares with a relatively strong month of 1992, whereas June and July were up against depressed numbers.

In general, department stores dodged the bullet that shot down the specialty-apparel segment. May Department Stores, Hecht's parent, gained 4.2 percent, while Dayton-Hudson, Federated Department Stores and J. C. Penney all notched modest gains in the 2-percent-to-3-percent range.

Economists watch the retail sector's performance closely because consumer spending makes up about two-thirds of U.S. economic activity. And the sales reports from major retail chains are an early indicator of overall retail spending. But the numbers can be misleading because they are heavily skewed toward apparel sales.

Monroe Greenstein, a retail analyst with Lazard Freres in New York, said the overall results for August were "poor but not a disaster."

"Home-furnishing sales were quite good, as were appliances and consumer electronics," Mr. Greenstein said.

But Otto Grote, a veteran retail analyst at Derby Securities in New York, was more downbeat.

"Business is coming apart at the seams," he said. When he talks with retailers, "they are depressed," Mr. Grote said. "They can't believe business is like that."

To Mr. Grote, a central problem is a crisis of economic and political confidence.

"Middle America is in an enormous squeeze," he said. "Middle America is in an ugly mood. . . . There's pessimism, and it's building up and it's snowballing."

But Edward F. Johnson, president of Johnson Redbook Service, said his company's surveys had found sales in August to be stronger than in June. The slight dip his company has detected in August sales compared with July's is mostly a result of hot weather, he said.

"It slowed down in August because of waiting for cold weather," he said.

And Jennifer Black Groves, an analyst with Black & Co. in Portland, Ore., suspects that August's heat-suppressed sales mean that there will be ample pent-up demand this month.

"I think in September you'll see some positive surprises with the companies that merchandise correctly," she said.

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