Sales rise in August, but pace is slowing Consumer spending seen likely to ease after yearlong spree

Retailing

September 04, 1998|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

In a sign that consumer spending may be slowing after a yearlong shopping spree, retail sales in August grew at a slower pace than in previous months.

Sales for the month, reported yesterday by the nation's largest retailers, either fell below the previous year's August sales or posted gains but failed to meet expectations.

Sales rose 3.95 percent in August from the same month a year earlier, according to the Bloomberg Composite Same-Store Sales Index of 23 retailers. The index had shown a 5.52 percent gain in July.

But part of the weakness could be attributed to the calendar -- as Labor Day will fall a week later in September than it did last year, analysts said. That meant less back-to-school buying in August.

"You cannot use what happened in the month of August as a gauge to evaluate what is happening," said Kurt Barnard, president of Barnard's Retail Trend Report, a forecasting firm based in Upper Montclair, N.J. "Last year, Labor Day fell on Sept. 1 and much of the back-to-school selling took place in August. It is happening right now in September."

Still, he said, a number of factors virtually guarantee that consumer spending will continue to slow.

"Americans are earning a lot of money, but they are spending all they are earning," he said, adding that debt has skyrocketed 23 percent in the past year, and, though unemployment is a low 4.5 percent, new job creation is beginning to contract. "All of those indicate that consumer spending will be perhaps a little less binge-y."

The year had been shaping up as one of the best ever for retailers, thanks to high employment, low inflation and strong consumer confidence. But in July, consumer spending in the United States declined for the first time in more than two years.

So far, steep declines in the stock market have had little effect on retail spending, Barnard said.

"For most people, this is so far paper wealth," Barnard said. "Consumer spending does not change drastically overnight, unless there's a major catastrophe."

According to Bloomberg's index, sales declined an average 0.65 percent at department stores, rose nearly 6 percent at discount stores and rose 5.37 percent at specialty and apparel stores.

Department stores were hurt because of their dependence on the back-to-school apparel buying, analysts said.

Only Saks Holdings Inc. and Kohl's Corp. saw gains, of 7.1 percent and 3.3 percent respectively. Sears, Roebuck and Co., J. C. Penney Co. Inc., Federated Departments Stores Inc. (owner of Macy's and Bloomingdale's), and May Department Stores Co., owner of Hecht's and Lord & Taylor), all lagged behind last year's results.

"Increases in home appliances and electronics led hard good sales in our full-line stores, offsetting much of the impact the later Labor Day holiday had on comparable store sales," said Arthur C. Martinez, chairman and chief executive officer of Sears.

Discounters, appealing to value-conscious consumers, continued to fare well, with sales rising 7.6 percent at Wal-Mart Stores Inc., 3.3 percent at Dayton Hudson Corp., which owns Target, and 5 percent at Ames Department Stores Inc.

The specialty chain Gap Inc. continued the momentum it has built through the popularity of its Old Navy and Banana Republic divisions, reporting sales gains of 9 percent.

The Limited Inc., in the midst of a turnaround that involves strengthening its merchandise and developing stronger brand recognition for its women's divi- sions, showed gains of 7 percent, while AnnTaylor Stores Corp. exceeded all other retailers in terms of sales percentage gains, with sales jumping 15.5 percent over August a year ago.

But the specialty store gains were the exception.

"If you look at sales on a percentage, they're not as robust as we've seen in prior months," said Kenneth Gassman, a Richmond-based retail analyst with Davenport & Co. "However August is the least important month of the quarter, and gross margins are holding, so profits should remain in line with expectations."

August has become less important to retailers as September has begun capturing more back-to-school sales, Gassman said. With many schools opening before Labor Day, and with school attire becoming more casual, students can continue wearing summer clothes longer, putting little pressure on parents to shop early for back-to-school necessities, he said.

'

Monthly retail sales

Company -- Dayton-Hudson

Monthly sales* -- $2,295

Monthly same-store pct. change -- +3.3

YTD sales* -- $15,385

YTD same-store pct. change -- +4.9

Company -- The Gap

Monthly sales* -- $795.0

Monthly same-store pct. change -- +9.0

YTD sales* -- $4,420

YTD same-store pct. change -- +16.0

Company -- J.C. Penney

Monthly sales* -- $1,269

Monthly same-store pct. change -- -2.4

YTD sales* -- $7,926

YTD same-store pct. change -- -0.6

Company -- Kmart

Monthly sales* -- $2,411

Monthly same-store pct. change -- +2.9

YTD sales* -- $18,042

YTD same-store pct. change -- +4.8

Company -- Kohl's Corp.

Monthly sales* -- $292.8

Monthly same-store pct. change -- +3.3

YTD sales* -- $1,796.1

YTD same-store pct. change -- +10.2

Company -- The Limited

Monthly sales* -- $664.4

Monthly same-store pct. change -- +7.0

YTD sales* -- $4,756

YTD same-store pct. change -- +7.0

Company -- Lowe's

Monthly sales* -- $924.5

Monthly same-store pct. change -- +4.0

YTD sales* -- NA

YTD same-store pct. change -- NA

vTC Company -- May Dept. Stores

Monthly sales* -- $927.2

Monthly same-store pct. change -- -0.7

YTD sales* -- $6,477.2

YTD same-store pct. change -- +3.6

Company -- Sears

Monthly sales* -- $2,990.1

Monthly same-store pct. change -- -0.3

YTD sales* -- $16,700

YTD same-store pct. change -- 2.8

Company -- Wal-Mart

Monthly sales* -- $10,263

Monthly same-store pct. change -- +7.6

YTD sales* -- $74,140

YTD same-store pct. change -- +8.5

* -- In millions

Pub Date: 9/04/98

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