Discounters still bright spot for weak retail
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By Karen JacobsATLANTA (Reuters) - U.S. discounters, led by Wal-Mart Stores Inc , remained a bright spot in a weak retail industry in August, as shoppers sought back-to-school deals, while department stores and luxury chains disappointed.Among retailers reporting August sales on Thursday, teen apparel outlets like Aeropostale Inc managed to top expectations in a flagging U.S. economy that has prompted consumers to rein in their spending and curb mall trips.Results "continue to show that there is a divide between discretionary and non-discretionary retailers," said Ken Perkins, president of Retail Metrics."Consumers are very focused on value, stretching their dollars; and anything deemed not absolutely of need, they are forgoing those purchases," he added.Overall sales at stores open at least a year rose 1.6 percent in August, better than a 1 percent increase predicted by analysts but still far weaker than 3.1 percent a year before, according to Thomson Reuters Estimates.Wal-Mart shares were up 1.7 percent as retail stocks slumped overall. The Standard & Poor's Retail Index <.RLX> was down almost 2 percent as new government data sparked concern about the labor market and corporate profits.Perkins said the August sales offered little encouragement for retailers during the all-important holiday season. The pressures consumers face, including rising food costs and tighter credit, are not likely to change before mid-November."These results are sort of mapping out more of what we are going to see during the holiday shopping season," he said.Industry forecasters are taking a cautious view of the holiday season in the wake of lackluster back-to-school sales.The International Council of Shopping Centers has said 2008 holiday sales should be their weakest since 2001, predicting a rise of 3.6 percent against a 4.2 percent gain last year.DISCOUNTERS BENEFITWal-Mart posted a 3 percent rise in same-store sales, beating analysts' forecasts of a 1.6 percent increase.The world's biggest retailer cited strong sales of groceries, medicines and other household goods and gave an optimistic forecast for September, helped by back-to-school."For Wal-Mart, the value message is really timely and is resonating," said Sarah Henry, an analyst with MFC Global Investment Management.Wal-Mart said shoppers were waiting until the end of the back-to-school period to make their purchases, a trend that was accelerated as more schools opened later in the year.Other low-price chains also fared well. Family Dollar Stores Inc posted a 3.6 percent rise in same-store sales, compared with expectations for a 3 percent increase. BJ's Wholesale Club Inc's same-store sales rose 15.4 percent, above forecasts for a 14.1 pct rise."We are a treasure hunt to our customers," Dollar Tree Inc Chief Executive Officer Bob Sasser told a Goldman Sachs retail conference.One surprise among off-price retailers was TJX Cos Inc , which had flat same-store sales in August, below analysts' and company expectations.Excluding the impact of foreign currency exchange rates, which hurt sales results instead of helping them as TJX had anticipated, sales would have been up 1 percent, in line with its expectations.TJX shares slid 6.6 percent to $34.36.THE RIGHT FASHIONBack-to-school sales gave a boost to apparel retailers such as Aeropostale, which topped estimates with a same-store sales rise of 13 percent. Rivals Hot Topic Inc and American Eagle Outfitters Inc posted smaller-than-expected declines of 2.7 percent and 5 percent, respectively.But higher-priced teen chain Abercrombie & Fitch Co stumbled, with an 11 percent fall in same-store sales, worse than the 7.9 percent decline analysts had expected."Clearly these retailers know that that's (back-to-school) their big opportunity," Henry said. "Getting fashion right would have been the difference between doing well and doing poorly this month."The luxury sector showed more signs of weakness, as Saks Inc and Nordstrom Inc posted worse-than-expected sales.Nordstrom sales fell 7.9 percent, worse than the 7.1 percent fall analysts had expected, while Saks had a 5.9 percent fall, compared with forecasts for a 4.7 percent dip."I would guess that they are not willing to sacrifice margin as much," Henry said. "That segment is under pressure right now and both of those companies are more exposed" to financial market stress.Aeropostale shares fell 1.1 percent to $35.53 while Hot Topic and American Eagle both gained around 4 percent. Saks was down 16 cents, or 1.4 percent, to $11.17, and Nordstrom gave up $1.52, or 4.6 percent, to $31.81.(Additional reporting by Martinne Geller and Aarthi Sivaraman in New York and Brad Dorfman and Ben Klayman in Chicago, editing by Dave Zimmerman and Gerald E. McCormick)
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