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Published: Friday, 9/4/2009

Consumer spending offers hope for holidays

ASSOCIATED PRESS

NEW YORK — Shoppers limited their back-to-school purchases and stayed focused on necessities in August, resulting in the 12th- straight month of declining sales for retailers, but there were signs the holiday season could be less dismal than feared.

Despite the weakness many reported, retailers overall did better in August than analysts expected. Some lower-priced chains, such as TJX Cos.' TJMaxx, and Gap Inc.'s Old Navy, even saw sales rise compared with a year earlier, though upscale stores' sales slipped.

“It does seem like the consumer is willing to spend if given a great deal,” said Carl Steidtmann, an economist at Deloitte Research. “That reflects a consumer that is slowly coming out of their bunker.”

There have been encouraging reports from the housing and manufacturing sectors that the economy is stabilizing, but any recovery will have to include an uptick in consumer spending because it accounts for about 70 percent of economic activity.

“It's still weak in the broad trend, but it is considerably stronger than it has been in some time,” said Michael Niemira, International Council of Shopping Centers' chief economist.

A monthly compilation of 32 retailers' sales by the shopping centers council and Goldman Sachs showed sales in established stores fell 2 percent this August compared with August, 2008. That was better than the 3.5 percent to 4 percent drop analysts forecast. About half of retailers reporting did worse than analysts polled by Thomson Reuters expected, while half did better.

ShopperTrak RCT, a Chicago-based research company that tracks customer traffic at more than 45,000 stores, said foot-traffic figures for back-to-school are in line with its forecast of a 10 percent drop from last year.

The better-than-expected sales results eased some analysts' concern that the holiday season will be as bad as last year.

“The core issue here is pent-up demand; that's what we'll be talking about this holiday season,” Mr. Niemira said. “I think August is the start of this transition to better times for the industry.”

The retail industry's monthly report comes more than a week before the U.S. Department of Commerce's monthly retail tally, due Sept. 15, which includes a much broader range of businesses such as auto, gasoline, and building materials retailers. Discounters performed best.

Target Corp.'s sales at established stores dropped 2.9 percent, better than the 5.1 percent drop analysts expected.

Upscale retailer Saks Inc. reported a 19.6 percent drop, even larger than analysts expected. And department stores remained weak. Macy's Inc. reported an 8.1 percent decline.

Gap reported lower sales but beat expectations, boosted by its Old Navy chain. Abercrombie & Fitch Co., which has kept prices higher than most competitors, reported a 29 percent drop, bigger than expected.



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