August Sales Bounce Back

by Doug Desjardins

Helped by a late surge in back-to-school shopping, retailers closed out the summer on a high note with better-than-expected August sales. The International Council of Shopping Centers (ICSC) said its index of 31 major retailers posted a 3.2-percent increase in sales for August, beating its initial forecast of 3 percent.

Some of the top performers for the month were apparel retailer Kohl's with a 4.5-percent increase in sales and Macy's with a 4.3-percent jump in sales. Costco reported another strong month with a 7-percent increase in sales and Nordstrom Inc. continued to rebound from a terrible year in 2009 with a 6.5-percent increase in same-store sales for August, beating analysts' projections for a 5.9-percent jump in sales.

At the lower end was JC Penney, which eked out a 2.3-percent increase in sales for the month. And Saks Inc. registered a barely-there 1-percent increase in sales for the month. In its report on August sales, the ICSC noted the lack of consistency in sale gains.

“August sales continued to reflect a bifurcated and uneven performance with a group of very strong performers and a group of weak ones within the same subsector,” the report stated.

Some analysts said the increase in sales was probably more a reflection of retailers getting more promotional than an increase in consumer confidence.

"Today's retail environment is extremely competitive and teens and parents alike are doing their homework before heading out to the malls or shopping online," said retail analyst Jennifer Black of Jennifer Black & Associates. "Promotions continue to be at the forefront for today's consumer."

That trend was reflected in a National Retail Federation survey in August that showed more than 30 percent of shoppers planned to compare prices online and in-stores before making their back-to-school purchases.

Analyst Richard Jaffe of Stifel Nicolaus pointed out that, though August sales managed a 3 percent increase over last year, they were being compared to very low sales figures in August 2009 that were easy to beat. “It’s hardly a cause for jubilation or excitement,” said Jaffe. “I think everybody is still struggling to make business.”

Heavy inventory coupled with sluggish June and July sales also played a part in a more promotional atmosphere at retail. Many retailers increased their orders for the back-to-school season this spring after an encouraging holiday season and strong January and February sales. But a four-month run of sub-par sales in late spring and early summer dampened enthusiasm about a recovery.

Pent-up demand among consumers may have played a role in healthy back-to-school sales, according to Retail Forward senior analyst Frank Badillo. “August sales held up relatively well because shoppers’ intentions to curb their spending plans were outweighed by their back-to-school needs, especially when they scrimped on meeting those needs a year ago,” said Badillo.

Looking forward, the ICSC expects retailers to maintain momentum, with sales projected to jump 3 percent in September.