Cold Weather Works in Retail's Favor

By Alana Semuels

Oct. 6, 2006 12 AM PT

Times Staff Writer

Sinking gasoline prices and unusually cool weather gave consumers extra pocket money and more reason to shop in September, helping drive strong sales at stores across the country, according to an industry report released Thursday.

“The words to describe sales would be ‘steady,’ ‘consistent’ and ‘relatively healthy,’ which is significant since everybody worries this is not going to be the case,” said Michael Niemira, chief economist with the International Council of Shopping Centers, a trade organization.

When compared with September 2005, the 57 major chains in the group’s tally recorded a 3.8% gain in sales at stores open at least a year.

Niemira said results for the back-to-school season -- with the strong September following an August sales increase of 2.9% -- could be a good predictor of customer attitudes.

“You can infer that the holiday season is probably going to be pretty decent,” he said. “The slowdown we all expected didn’t show up.”

Shoppers last month were more optimistic about spending because of falling gas prices, accelerating income growth and lower interest rates, Niemira said. Surveys showed that consumer confidence rose after falling in August.

Nordstrom Inc., Guess Inc. and Target Corp. were among the biggest winners in September, with sales up 13.4%, 11.3% and 6.7%, respectively.

But Wal-Mart Stores Inc. failed to reach the low end of its sale projections, with same-store sales rising 1.3%, leading some to speculate that customers were becoming more discerning in their shopping habits.

Department stores did especially well last month, with sales rising 8.4% -- the best performance in that sector since January 1997.

Low-end retailers fared less well. Discount and warehouse stores, including Costco Wholesale Corp. and BJ’s Wholesale Club Inc., were up just 2.3%, according to a Thomson Financial report. Taking Wal-Mart out of the equation, discount stores did slightly better, with sales up 4.5%.

The lackluster performance of discount stores indicates they will have to fight harder for customers’ dollars, said Marshal Cohen, chief analyst at the NPD Group Inc. Upper- and middle-income shoppers will only go to a discounter for goods that are fashionable and well made, he said.

That also explains the strong performance of department stores such as Federated Department Stores Inc., which launched a large advertising campaign to promote the name change of 400 stores to Macy’s.

“We’ve certainly seen the pendulum swing back toward department stores that have figured out how to reconnect with their customers,” Cohen said.

Weather also helped. Retailers said a colder September led shoppers to buy warm clothes earlier than usual.

Most retailers benefited from comparisons with last year, when shoppers who were weathering the effects of hurricanes Katrina and Rita had less to spend. But the opposite was probably true for Wal-Mart, analysts said, as customers stocked up on supplies to ride out the hurricanes and their aftermath.

Strong back-to-school shopping helped teen retailers in September, with Zumiez Inc. reporting a same-store sales gain of 14.9% from a year earlier, Bebe Stores Inc. gaining 15.3% and Abercrombie & Fitch Co. rising 10%, double what analysts had forecast.

Fashions such as skinny pants and longer tops helped teen retailers as shoppers overhauled their wardrobes, said Christine Chen, an analyst with Pacific Growth Equities in San Francisco. (Chen owns shares in Gap Inc., Hot Topic Inc. and Guess.)

“It’s not just a change in color this year, it’s a change in shape too,” she said. “A lot of kids went back to school and saw what the cool kids were wearing and bought new things.”

Not all retailers benefited from the back-to-school push.

Same-store sales at Gap, which has been struggling for the last two years, were down 3% from last year. But the chain noted that its sales trend improved since last year, when the company posted a 6% decline.

City of Industry-based Hot Topic continued its slump, with same-store sales falling 7.3%, sending its shares down $1.44, or 12.2%, to $10.33. The company warned that third-quarter earnings would be at the low end of estimates.

September sales at Pacific Sunwear of California Inc., at which Chief Executive Seth Johnson resigned Monday, were down 2.4% but still better than analysts’ expectations.

alana.semuels@latimes.com

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School’s in

Year-over-year percentage change in September sales at stores open at least a year

(Company: % change)

Nordstrom: +13.4%

Limited Brands: +12.0%

Guess: +11.3%

J.C. Penney: +8.7%

Target: +6.7%

Ross: +6.0%

Federated: +6.2%