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Retail sales strong in Sept.

It could bode well for department stores this holiday season. An exception is Wal-Mart.

By ASSOCIATED PRESS
Published October 6, 2006

NEW YORK - With just seven weeks to go before the traditional start of holiday shopping, retailers' hopes for an upbeat season are suddenly brighter.

The nation's retailers reported better-than-expected sales gains Thursday after consumers, encouraged by cooler temperatures and falling gasoline prices, went on a clothes-shopping spree at the malls in September. A notable exception was Wal-Mart Stores Inc.

In a marked shift in consumers' recent behavior, shoppers chose to forgo some low-price operators and headed instead to department stores that have reinvented themselves with better fashion trends. The department store sector - which included stars such as Nordstrom Inc. and J.C. Penney Co. Inc. - posted its best performance since January 1997, while wholesale clubs had their weakest results since January 2005, according to the International Council of Shopping Centers.

"The department stores are better poised this holiday season than they have been for many years," said Ken Perkins, president of RetailMetrics LLC, a research firm in Swampscott, Mass.

He added: "The fact that they are faring well will only help drive mall traffic," which has been declining for years.

Scott Krugman, a spokesman at the National Retail Federation, said department stores' newfound success will have a psychological effect on the industry.

"When people think of retailing, they think of department stores," said Krugman. "I think when department stores are down, people tend to be down on retailing."

Some analysts speculate that what's helping to change shoppers' behavior is the cooling housing market, which they believe is shifting spending away from big-ticket items like household appliances and furniture, and to fashion.

The international council's index of retail sales rose 3.8 percent in September, but excluding Wal-Mart's results, the tally rose a robust 6.0 percent. The index is based on same-store sales, those from stores open at least a year. The department store sector, which has been rebounding over the last couple of months, enjoyed an 8.4 percent same-store sales increase.

"Right now, we are in a sweet spot for spending," said Michael Niemira, chief economist at the international council.

Still, even with better-expected results, Niemira is still sticking with his 3 percent forecast for same-store sale growth for the combined November-December period.

Wal-Mart, the world's largest retailer, which has blamed soaring gas prices for slowing sales, didn't benefit from lower prices at the pump. It said its same-store sales rose 1.3 percent, well short of the 2.1 percent expected by analysts surveyed by Thomson Financial. The company said its sales, measured against September 2005 figures, paled in comparison because the year-earlier results were bloated by a rush of pre- and post-hurricane shopping.

Rival discounter Target Corp. posted a 6.7 percent gain in same-store sales. The results beat the 5 percent analyst estimate. Target also raised its third-quarter outlook.

Meanwhile, the department store sector is being re-energized by a concerted effort to offer more exclusive fashions, according to Patricia Walker, a partner in Accenture Ltd.'s retail practice.

Penney had an 8.7 percent gain in same-store sales, better than the 5.2 percent estimate, while Kohl's reported on Tuesday a robust 16.3 percent gain in same-store sales, exceeding the 8 percent estimate. Both have been on a campaign to sign up exclusive deals with such designers as Vera Wang and Nicole Miller.

[Last modified October 5, 2006, 22:53:53]