Friday, October 10, 2003

Retailers: Sales continue to be better than expected

By Anne D'Innocenzio
The Associated Press

NEW YORK - The outlook for the holiday shopping season got a boost Thursday as retailers reported their third straight month of better-than-expected sales. Tax rebates and cooler weather gave consumers an incentive to spend freely, particularly on apparel.

September same-store sales reported by the five largest retailers (sales compare the current year's sales with those of the previous year at stores open at least a year):

Wal-Mart Stores, up 6 percent.

Target, up 5.4 percent.

J.C. Penney, up 0.7 percent (J.C. Penney stores only).

Sears, Roebuck and Co., up 3.2 percent (domestic stores only).

Gap, up 13 percent (domestic stores only).

Kmart, the third-largest retailer, which emerged from bankruptcy in May, does not report monthly sales.

The strong showing came across all retail categories, indicating a continuing improvement in the economy.

Cincinnati's Federated Department Stores boosted its earnings guidance for the third quarter after the unexpected spike in September sales.

The company said strong sales of fall apparel pushed same-store sales - sales at stores open at least a year - up 3.2 percent, compared with the company's prior forecast for sales to be flat to down 1 percent.

Total sales for September rose 3 percent to $1.35 billion from $1.31 billion in the same period last year.

In light of the better-than-expected monthly report, Federated said it now expects third-quarter earnings of 30 cents to 33 cents a share, compared with its previous forecast of 25 cents to 30 cents a share.

At Dayton-based Elder-Beerman Stores, same-store sales increased 2.9 percent in the period.

Still, some analysts worry that the sluggish job market, while looking better, remains a big obstacle to a sustained increase in consumer spending.

"I've been trying to look for a new job, but it's hard," said consumer Nicola Samuels, 26, of Atlanta. "It makes a big difference what kind of shopping you're doing, when you're not totally sure about the job thing."

Merchants are hoping that there will be more consumers like Anne Vick, who has increased her spending these past few months. She recently took a shopping trip to Chicago with her 18-year-old daughter and invested in major home improvements.

"I don't think we would have done that last year," said the Wauwatosa, Wis., resident. "We just thought things are getting better. We can probably do this now."

Discounters and moderate-priced stores including Wal-Mart Stores Inc. and Target Corp. again turned in strong September results, but mall-based stores including Limited Brands Inc. and department stores such as Federated Department Stores Inc. and Nordstrom Inc. issued reports that were a pleasant surprise, exceeding expectations.

Sears, Roebuck and Co., helped by strong sales of its new clothing brands including Lands' End and Covington, also reported results that pleased Wall Street.

"The broad-based improvement is now at hand," said Michael P. Niemira, vice president at the Bank of Tokyo-Mitsubishi Ltd. "Clearly, the consumer is on the comeback. ... This is an affirmation that this will be a much better holiday season, perhaps the best since 1999."

The Washington-based National Retail Federation projects total holiday sales, which exclude restaurant and auto sales, will be up 5.7 percent to $217.4 billion. Holiday sales in 2002 increased just 2 percent to $205.6 billion from the previous year.

But Frank Badillo, senior retail economist at Retail Forward, a consulting firm in Columbus, is more wary, expecting only a modest improvement from last year. He thinks that such factors as mortgage refinancing and tax rebates will dissipate before the holidays.

"New jobs will have to kick in in order to pick up the pace" in spending, he said.

Still, a report from the Labor Department Thursday was a comforting sign to the industry that the pace of layoffs is starting to ease. New claims for unemployment insurance fell last week to their lowest level in eight months.

For the work week ending Oct. 4, new applications for jobless benefits declined by a seasonally adjusted 23,000 to 382,000, the best performance since Feb. 8 and a better showing than analysts forecast. They had predicted claims would decrease to 395,000 last week.

Enquirer reporter Randy Tucker contributed to this report.

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