The start of school failed to loosen the purse strings in many U.S. households last month, meaning a disappointing drop in August sales for most clothing sellers and only modest sales increases for much of the rest of the retail industry.
Aggravating the situation this year, said Todd Slater, a retail analyst with Lazard Frere in New York, many apparel sellers had not fully cleared out spring and summer merchandise. That meant lots of cheap leftovers at the same time that overall consumer demand has waned.
It's not that consumers have stopped shopping. Purchases of durable goods, such as consumer electronics and appliances, remained strong, boosting sales at stores such as Sears Roebuck & Co. Lower-priced seasonal goods, such as clothing, were mostly off, dealing a blow to department stores and Gap Inc.
"Back to school has been happening less and less every year," Slater said. "Kids don't want to buy their entire wardrobe at the beginning of the season, they want to wait and see what other kids are wearing. Parents buy when there are good sales, and that occurs throughout the year."
As a whole, retail sales grew a scant 3 percent in August over the same period a year ago, according to Goldman Sachs. That number was disheartening to many retailers who had hoped for a return to the boom times of last year. Instead, they got a continuation of the sales sluggishness of the last few months.
Same-store sales at specialty clothing stores and off-price sellers fell a combined 2.4 percent compared to the same period last year, as tallied by Goldman Sachs. Department stores were essentially flat, falling 0.8 percent.
Abercrombie & Fitch, once the darling of both Wall Street and teenagers though recently more troubled, reported sales off 3 percent as compared to last year.
Abercrombie shares fell $2 to $23.19 on the New York Stock Exchange.
Gap, which warned investors last month of sales weakness and earnings misses, particularly suffered at its Old Navy stores. Goldman Sachs pegged Old Navy same-store sales decline at a whopping 27 percent to 29 percent; Gap domestic stores sales were down 5 percent to 7 percent; Gap International sales fell 7 percent to 9 percent, and Banana Republic dropped 1 percent to 3 percent.
Shares in Gap fell to their lowest level in nearly two years, down 25 cents to $22.25 on the New York Stock Exchange.
Discount sellers such as Wal-Mart Stores Inc. and Kmart Corp., however, were still able to trade on their value formula, gaining 5 percent as a group during August even as compared to last year's 7.8 percent August gain.
"You're going to have a lot of losers in this environment and it's going to continue to rotate," said retail analyst Michael Niemira, of the Bank of Tokyo-Mitsubishi in New York. "It's the nature of the shrinking demand pie."
What is puzzling about consumers' latest habits, Niemira said, is that ordinarily in a softer economy, shoppers buy clothes and other lower-priced items and forego the big-ticket purchases. The opposite is happening now.
Sears, with a 5.6 percent same-stores gain, gained mostly from healthy sales of appliances and other hard goods, though it, too, suffered weakness in apparel sales.
Luxury sellers also fared well, with Neiman Marcus posting an 8.1 percent same-store sales gain. Boutique store Talbots also gained, posting a whopping 18.5 percent gain in stores open at least a year.
Same-store sales are considered an important measure of a company's general, overall performance because the figure excludes new and closed stores.
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