RetailSails

With the back-to-school shopping season and Labor Day sales in the rear-view mirror, consumers tightened their wallets last week, as both ICSC and Redbook reported soft chain-store sales results:

• The International Council of Shopping Centers (ICSC) reported that comparable same-store sales increased 0.6% in the 3rd week of September vs. a year ago, while same-store sales declined 2.0% on a week-over week-basis. That was largest weekly decline since early January. “The year-over-year pace of sales is being lifted by some easier comparisons with September 2008 performance, which marked the start of an extended period of more intense downward pressure on sales from the strengthened recessionary grip on consumer spending,” said Michael P. Niemira, the ICSC’s chief economist. He added that consumers “may have enjoyed more time outdoors for the week, rather than shopping, as mild weather was present.” ICSC Research expects the same-store sales decline for September will be in-line with August results, down 2.0% from a year ago.

• Redbook Research reported that retail same-store sales for the week ending September 19th declined 2.6% compared to the year-ago period, while month-to-date sales rose 0.3% from the same period last month, and are down 2.3% compared to the same period last year. “Discount stores remained above plan, which were sustained largely by food and household supplies as well as certain hard lines such as electronics, while department stores fell behind,” said Catlin Levis, Redbook analyst. Apparel sales were slack, which particularly hurt department stores, said Levis. “Both formats saw a mix of business in back-to-school categories, now winding down, and in fall apparel, but traffic was thin and volumes disappointing,” she added. Note that Wal-Mart stopped reporting weekly and monthly sales figures in May of this year, and the substantial impact they had on the index is evident in the graph below.

While retailers will be up against much easier comps through the end of the year, consumers will continue to be extremely cautious with their spending until we see meaningful improvements in income and employment. Next up is the all-important holiday shopping season. Based on early projections from Deloitte, Retail Forward, and Global Hunter Securities, we should expect this holiday season to be roughly flat to last year. While that certainly sounds better than the large year-over-year declines we have become accustomed to, it would still mark the 2nd worst holiday performance in 42 years.

Today’s weekly chain store sales reports provided a glimmer of hope that brighter days might lay ahead for retailers, as both the ICSC and Redbook Indexes continue to show improvement:

• The International Council of Shopping Centers (ICSC) reported that comparable same-store sales increased 1.6% in the 2nd week of September vs. a year ago, while same-store sales were flat on a week-over week-basis. Though this was the largest YoY gain for the index since the 1st week of September ‘08, there were several mitigating factors. “Sales were unchanged from the prior week, but jumped from the prior year – in part due to easier comparisons, calendar and base-year effects, mild weather and slightly better demand,” said Michael P. Niemira, ICSC’s chief economist. “With easier sales comparisons in September, the industry should see overall improvement. However, ICSC Research expects sales will be down about 2 percent from its year-ago level,” Niemira added.

• Redbook Research reported that retail same-store sales for the week ending September 12th declined 1.9% compared to the year-ago period, while month-to-date sales rose 0.5% from the same period last month, and are down 2.1% compared to the same period last year. “Most retailers reported a positive Labor Day holiday, with improved sales growth on Sunday and Monday,” said Catlin Levis, Redbook analyst. “Thereafter, business tailed off sharply in the middle of the week, only to build up again into the weekend and was sufficient to leave our model ahead of plan month-to-date.” Note that Wal-Mart stopped reporting weekly and monthly sales figures in May of this year, and the substantial impact they had on the index is evident in the graph below.

The Census Bureau also provided some evidence this morning that consumers might be loosening the hold on their wallets, reporting that Retail Sales for August were up 2.7% from the prior month. While the government’s cash for clunkers program was responsible for a large part of that, the monthly gain excluding autos was still a robust 1.1%.

However, after seeing weak August same-store sales results for the individual companies that reported earlier in September, we suspect seasonal adjustments played a large role in this month’s strength. We will be examining the government’s report in more detail shortly.