September Retail Sales Inch Up

by Doug Desjardins

Continuing a trend that began early this summer, September retail sales posted modest gains helped in part by last-minute back-to-school shoppers.

According to a Thomson-Reuters poll of top retailers, sales rose 2.1 percent in September, slightly better than analysts expected and extending a long streak of positive same-store sales gains.

"While September 2010 marked the first month that retailers faced positive comparisons from a year ago, retailers still posted their thirteenth consecutive month of positive same-store sales," said Jharron Martis, an analyst with Thomson-Reuters. "September sales were bolstered by back-to-school shopping during the first weeks of the month, when parents shopped for last-minute deals while teenagers, eyeing classmates' outfits and accessories, hit the malls to get in on the latest trends."

Most retailers - nearly 75 percent - reported better than expected sales. They included Costco, which reported a 5% jump in same-store sale despite 12.2% unemployment in California, home to nearly one-third of its U.S. stores.

Higher-end retailers continued to post strong gains. Limited Brands reported a 12-percent increase in September sales while Nordstrom posted a 4.5-percent gain and Saks Inc. checked in with a 5-percent increase. Michael Niemira, chief economist with the International Council of Shopping Centers (ICSC), said the improvement at high-end retail is a good sign for the holiday season.

"The fact that luxury continued to post a strong performance is not surprising, given the recent improvement in high-income household consumer confidence," said Niemira. "This is especially encouraging for the economy and the upcoming holiday season because the top 20 percent of households by income account for nearly 40 percent of total consumption."

The only negative sign for retailers was a slow last week of September, with sales declining 0.8 percent according to the ICSC.

While the increase in September sales wasn't outstanding, it was good enough to give retailers hope for the next few months as the holiday season nears.

"Retailers are hoping the holidays bring sustainable economic growth," said Matthew Shay, chief executive of the National Retail Federation. "Though the retail industry is on stronger footing than last year, companies are closely watching key economic indicators like employment and consumer confidence before getting too optimistic that the recession is behind them."

A report from BMO Capital Markets echoed that sentiment and suggested that retailers can’t expect to see a big rebound in sales until the economy shows real signs of recovery.

“U.S. retailers reported that same-store sale rose in September, helped by a late-start to back-to-school shopping,” the report stated. But this economy is still likely growing at a sub-part rate and the labor market is not producing enough jobs to reduce the unemployment rate.”