"Small as that gain was, it … marked a significant psychological turning point for the industry performance, as well as the start of the retail recovery," wrote Michael P. Niemira, ICSC chief economist and director of research. "Overall, the sales environment in September turned out to be stronger than expected for the second consecutive month and marked a turning point in the retail sales cycle as the economy continues to shed its recessionary drag."
A late Labor Day boosted back to school sales more than expected--ICSC had predicted a 25-basis point gain, but the real gain may have been three times that, Niemira said. The results show that consumer demand is returning to the hardest-hit channels, said Dave Marcotte, director of retail insights for Cambridge, MA-based consultancy MVI.
"MVI sees some reason to believe that retailers and consumers are starting to move to new ground," Marcotte wrote in an analysis.
Wholesale clubs' overall numbers--up 0.8%--continued to suffer from lower gasoline prices versus a year ago--excluding fuels, sales rose 4.2%. Food deflation, which hurt BJ's Wholesale's sales--down 0.5% in September--will be less of a factor in October, says Robert Ohmes, discount store analyst for Bank of America Securities/Merrill Lynch in its monthly sales call.
"This will be a nice gift for BJ's, given that food is such a large portion of its sales versus Costco and Target," Ohmes says.
Discount store sales rose 0.5%, with TJX's sales rising 7.0% and Target's declining its 1.7%--the smallest drop this year. Drug store sales rose 3.7% with Walgreens reporting a 5.3% increase and Rite Aid a 0.3% drop.
Department store sales declined 2.3%, its best showing since April 2008. Kohl's sales rose 5.5%, while Dillards declined 6.0%. Luxury store sales dropped 8.5%, again its strongest showing in more than a year.
An exception was apparel specialty stores, which posted a 4.5% drop in the ICSC index. The teen sector overall declined 27.9%. However, several apparel retailers reported surprisingly strong figures; even Abercrombie & Fitch's 18.0% decline was a dramatic improvement over previous months.
"The key message is that sales trends are getting better," says Lorraine Hutchinson, specialty and department store analyst of Bank of America/Merrill Lynch. "The numbers we saw reflected a lot more than just a [Labor Day] shift."
But enthusiasm should be tempered, says Columbus, OH-based Retail Forward in its ShopperScape survey, which asks consumers their retail plans for the following month. Shoppers' intentions to spend in October dipped after increasing the previous month, the survey says.
"September's numbers are a good sign that retail sales are on a path to recovery," says Frank Badillo, senior economist at Retail Forward. "But it will be a slow, bumpy road as shoppers are cautious about easing the grip on their spending plans. It will take more time for sales declines to turn into gains for all retailers and not all of them will benefit equally."
With unemployment remaining high, no one should expect a sudden surge of consumer spending, MVI notes. But the market is becoming more predictable, with customers now considering discretionary purchases. ICSC anticipates that October sales will be relatively flat from the same month of theprior year.
"Consumers buying for more than just survival is an early sign for a hopeful upcoming holiday season," Marcotte said.
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