Retailers report strong gains for August
Last Modified: February 16. 2013 8:36PM
A range of retailers from discounter Target to club-operator Costco on Thursday reported August sales that beat Wall Street estimates. The results seem to show that what Americans say and do are two different things: The strong sales reports come two days after a private research firm said consumer confidence in August fell to its lowest level since November 2011.
‚??It shows some resilience among shoppers. Let‚??s face it. There are a whole series of economic headwinds that they are fighting against,‚?Ě said Ken Perkins, president of Retail Metrics, a research firm. ‚??The results show that the consumer isn‚??t dead.‚?Ě
A small group of merchants representing roughly 13 percent of the $2.4 trillion U.S. retail industry report monthly revenue at stores open at least a year, a key measure since it excludes results from locations that open and close during the year. Some of the biggest retailers like Wal-Mart and Home Depot do not report monthly sales, but the figures still are closely watched because they offer a snapshot of consumer spending, which accounts for more than 70 percent of economic activity.
August‚??s results are important because they offer insight into the back-to-school season ‚?? the second most important selling period behind the winter holidays ‚?? which runs from mid-July through mid-September. Retailers and economists often use the results from back-to-school as a litmus test of how shoppers will behave during the biggest shopping period of the year in November and December.
The gains are an encouraging sign for retailers at a time when there are signs that consumers are becoming impatient with the slowly improving economy. The New York-based Conference Board‚??s Consumer Confidence Index fell to 60.6, down from a revised 65.4 in July. The index now stands at the lowest point since November 2011 when the reading was at 55.2. It‚??s also still far below the 90-reading that indicates a healthy economy.
Several factors may have dampened consumers‚?? moods in August. Gas prices, which had fell sharply from a peak of $3.94 in April, have begun rising again in the last few weeks. And the jobs and housing markets are showing only modest signs of improvement.
Home prices rose 0.5 percent in June from the same month last year, the first year-over-year increase since the summer of 2010, according to The Standard & Poor‚??s/Case-Shiller home price index that was released Tuesday. And on the job market front, employers added 163,000 jobs in July, the most since February. But that‚??s not enough to keep up with a rising population, and the unemployment rate increased to 8.3 percent from 8.2 percent in June.
And there are no signs the job market will significantly improve anytime soon. The applications of people applying for unemployment benefits are a measure of the pace of layoffs. When they fall consistently below 375,000, it generally suggests that hiring is strong enough to lower the unemployment rate. But the Labor Department said Thursday that the number of Americans seeking unemployment benefits was unchanged last week at a seasonally adjusted 374,000, which further suggests slow improvement. The four-week moving average, a less volatile measure, increased to 370,250.
Most economists say stronger growth is needed to produce enough jobs to lower unemployment ‚?? and make Americans feel better. The economy grew at an annual rate of 1.5 percent from April through June, down from 2 percent in the first quarter and 4.1 percent in the fourth quarter of 2011.
Despite their concerns about the snail pace recovery, Americans are spending. Costco Wholesale Corp.‚??s revenue from stores open at least a year climbed 6 percent, beating the 4.5 percent rise analysts surveyed by Thomson Reuters had anticipated. And Target Corp. reported a 4.2 percent increase in revenue at stores opened at least a year. That was better than the 3.1 percent increase that analysts had expected.
‚??Sales were stronger in the second half of the month, as guests responded to Target‚??s broad assortment and compelling value for their back-to-school and back-to-college shopping,‚?Ě said Gregg Steinhafel, Target‚??s chairman, president and chief executive officer in a statement.
Not every retailer fared well, though. Struggling teen clothing seller Wet Seal Inc. said Thursday that its revenue in stores open at least one year fell 18.3 percent in August as it revamped its clothing offerings. Analysts had expected a 17 percent drop.
The chain said it was trying to make its merchandise attractive to a broader range of consumers while pricing clothes to appeal to adolescent shoppers, its main customers.