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Consumers buy, but cheaper

Back-to-school merchandise helps lift August sales, with discount and low-price stores faring the best.

Associated Press
Published September 5, 2003

NEW YORK - Consumers spent generously on back-to-school items in August but still were focused on the bottom line, doing most of their shopping at Wal-Mart Stores Inc. and other low-priced stores.

But many mall-based apparel stores struggled to keep pace, indicating that a consumer spending recovery is spotty. The nation's merchants reported their August sales Thursday.

Wal-Mart, the world's largest retailer, reported its best same-store results since June 2002. Sears, Roebuck and Co., powered by robust sales in home appliances, posted its first same-store sales increase in two years. Same-store sales are sales at stores open at least a year, and are considered the best indicator of a retailer's health.

Swank retailer Neiman Marcus Group also posted August results that were well above analysts' forecasts.

But gains at Gap Inc. were disappointing, while teen retailers Abercrombie & Fitch and American Eagle Outfitters Inc. suffered sharp declines.

"The entire back-to-school sales season gravitated to discounters and other low-price stores," said Kurt Barnard, president of Retail Forecasting LLC in Upper Montclair, N.J."Consumers continue to be spooked by the deteriorating jobless picture."

Bank of Tokyo-Mitsubishi Ltd.'s same-store sales tally of 73 stores showed a 5.1 percent increase, beating its forecast for a gain of 4 to 5 percent. That compares to a 1.8 percent gain in the year-ago period. The August increase was the biggest since June 2002, when the index posted an increase of 5.1 percent.

Michael P. Niemira, vice president of Bank of Tokyo-Mitsubishi, said that while "the underlying pace of sales has improved since July," the figure overstates the strength because of the Wal-Mart factor. Without the Wal-Mart results, the index posted a 4 percent increase.

Discounters had a 6.4 percent increase in August, while wholesale clubs posted an 8.8 percent gain. In comparison, mall-based apparel stores recorded an anemic 0.5 percent increase.

Niemira observed that the middle-income consumer continues to be weighed down by a sluggish job market, while the high-income consumer, buoyed by an increase in the stock market, and the low-income consumer, helped by the tax rebate checks, have increased spending.

August accounts for about 8 percent of the retailer's annual sales and marks the period when stores focus on back-to-school selling while getting rid of summer leftovers. The nation's biggest blackout in history, which occurred in mid August, caused some disruptions, though Niemira said that stores for the most part were able to recoup two thirds of lost sales.

Wal-Mart reported that same-store sales were up 6.9 percent, far exceeding the 4.9 percent gain that analysts polled by Thomson First Call expected.

In a pre-recorded call, the discounter said sales were boosted by back-to-school merchandise, and such items as men's apparel, electronics and hardware, but it did say that unit sales continue to outpace dollar sales.

Target Corp. said that same-store sales were up 5.7 percent, well above analysts' forecast for a 3.8 percent gain.

Sears, Roebuck reported that same-store sales for its domestic business rose 3.9 percent, well ahead of the 0.6 percent gain forecast by Wall Street.

The performance ended a 23-month losing streak for Sears, thanks to stronger home appliance sales and an improving economy.

In addition, Sears chairman and CEO Alan Lacy said "wet weather extended the growing season in most regions, which fueled continued strong increases in Sears' lawn and garden business."

Also helping was a favorable comparison to a particularly poor month in August 2002.

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