Discount stores ring up the sales

But many retailers report poor results during August

Retail

September 03, 1999|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Specialty apparel chains and discount stores saw their sales climb in August, while other retailers blamed sluggish back-to-school sales for disappointing monthly results.

Sales at the nation's chain retailers, reported yesterday, rose, on average, a healthy 6.6 percent based on an index of 75 retail chains tracked by Bank of Tokyo-Mitsubishi Ltd.

Among those benefiting most from strong consumer confidence and spending during the first month of back-to-school shopping were mass discounters such as Wal-Mart Stores Inc., the world's largest retailer.

Wal-Mart said yesterday that sales at stores open at least a year rose 8.7 percent. Dayton Hudson Corp.'s sales rose 4.9 percent, largely because of higher-than-expected sales at its Target discount division, the retailer said.

"This has been a retail boom that has been driven by middle-class and working-class people," said Rick Gallagher, vice president of the National Retail Federation and publisher of the trade journal Stores Magazine. "That explains why we see the retail channels like discount stores doing so well."

Though Wal-Mart continues to take market share from its competitors, August was a solid month for most in the industry, said Kurt Barnard, president of Barnard's Retail Trend Report of Upper Montclair, N.J.

"It showed consumers continued to spend with unabated zest, and they were undeterred by interest rate increases," Barnard said.

Higher interest rates didn't bother consumers, but they have bothered investors. The Standard & Poor's Retail Index of retail share prices fell 10.65 points, or 1.29 percent, to 814.74 yesterday. Analysts said fears of another interest rate increase overshadowed the sales results.

"The fear is that higher interest rates will slow down consumer spending in time for the Christmas season," Argus Research analyst Alan Mak said.

Specialty apparel retailers continued to post strong results. The Gap Inc. said sales rose 8 percent.

The picture was a bit more bleak for some retailers working to remake their images and carve out niches in the competitive industry, notably Sears, Roebuck and Co. and J. C. Penney Co. Inc.

"Although the overall pace of sales for August showed no dramatic industrywide change, the composition of those sales was somewhat less favorable, in part due to the continuing weak sales at Sears and J. C. Penney," Michael P. Niemira, vice president of Bank of Tokyo-Mitsubishi, said in a report yesterday.

Sears, the No. 2 U.S. retailer, sharply lowered its third-quarter and full-year earnings forecasts yesterday because of weak August sales, which rose 0.1 percent.

"Sales in categories such as lawn and garden, men's and footwear were below the levels of a year ago, and overall comparable revenue performance for the month was not up to our expectations," Arthur C. Martinez, Sears chairman and chief executive officer, said yesterday.

The company said it expects third-quarter earnings to be 63 cents to 67 cents a share, less than in last year's third quarter and well below analysts' consensus estimate of 82 cents.

J.C. Penney reported a sales decline of 3.2 percent at its department stores open at least a year. It blamed weak sales of national-brand jeans, part of its back-to-school promotion. The decline came as the chain shifted most of a home furnishings sale to July. It was held in August last year, the retailer said.

Federated Department Stores Inc. said it, too, suffered from shifting a home sale from August to July in several divisions. Sales rose 2.9 percent in August, the chain said.

Kmart Corp, the nation's third-largest retailer, reported a disappointing back-to-school season, with sluggish sales in school supplies. Sales rose 3.4 percent.

Categories showing strength included children's and men's apparel, electronics, housewares and decor, jewelry, fashion accessories and pharmaceuticals, said Floyd Hall, Kmart's chairman, president and chief executive officer.

It would be a mistake for retailers to consider the back-to-school selling season over, Gallagher said.

"It begins as early as mid-July and lasts fully through mid-October," Gallagher said. "Kids at every age level are far more fashion-conscious than any previous generation. They get to school, see what's fashionable, then go out and shop."

Wire services contributed to this article.

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