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.

Shoppers showed some signs of life in the first week of September, as both ICSC and Redbook reported improvements in Weekly Chain Store Sales results:

• The International Council of Shopping Centers (ICSC) reported that comparable same-store sales decreased 0.1% in the first week of September vs. a year ago, while same-store increased 0.6% on a week-over week-basis. Commenting on the results, ICSC chief economist Michael P. Niemira said sales picked up last week “as the cooler-than-normal weather combined with the later start of the school year in some parts of the country helped to drive traffic.” He added, “Although easier comparisons in September will help to improve the trend for the month, ICSC Research still expects sales will be down about 2%” from last year.
• Redbook Research reported that retail same-store sales for the week ending September 5th declined 2.4% compared to the year-ago period, while sales for the first week of September rose 0.2% from the same period last month. The firm said “Shoppers responded positively to various Labor Day sales and promotions. Discount stores reported strength in categories such as children’s clothing, shoes and lower margin back-to-school supplies. Discount stores also registered strong food sales ahead of the long weekend.” However, department stores, which have been the weakest performers throughout the recession, continue to struggle. 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.

It will take several weeks to see if this represents real improvement or if it was more of a calendar effect, as most likely a good part of the demand was from Labor Day sales and late back-to-school shopping which was pushed into September from August of last year. While we don’t expect much underlying improvement in consumer demand for September, retailers will benefit from a late Labor Day and be up against much easier same-store comps from last year. Even though the bar is set fairly low for holiday sales expectations, we should start to see positive year-over-year results in October and November, as those were the months last year spending really fell off a cliff.

August ended with a whimper for retailers. For the third consecutive week, both ICSC and Redbook reported year-over-year declines in U.S. Chain Store Sales as back-to-school season failed to spur demand:

• The International Council of Shopping Centers (ICSC) reported that comparable same-store sales decreased 0.7% in the last week of August vs. a year ago, while same-store decreased 0.5% on a week-over week-basis. Commenting on the results, ICSC chief economist Michael P. Niemira said “Although the back-to-school calendar shifts will, on balance, boost year-over-year sales in August a tad, there was little discernible improvement in the trend during the entire month otherwise,” ICSC expects total sales for the month of August will be down between 3.5 to 4 percent.
• Redbook Research reported that retail same-store sales for the week ending Aug 29th declined 4.1% compared to the year-ago period, while sales for the first four weeks of August were down 0.6% from the same period last month, and 4.3% lower than last year. The firm added that consumer interest last week was on seasonal and back-to-school merchandise. It added that the sales declines are expected to continue, with preliminary targets for September of down 4% from last year and 1.5% from August. 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.

By all accounts, back-to-school spending has so far been disappointing for most retailers. Early promotions, state tax holidays, and a late Labor Day were not enough to lure shoppers into increasing their spending in the month of August. Barring a last-minute splurge by consumers, don’t expect to see much improvement in September. We should start to see retailers improve their year-over-year figures starting in October, as most companies will be dealing with extremely weak comparable sales from last fall.