August Retail Sales a Pleasant Surprise

NEW YORK CITY-Summer is ending with a pleasant surprise for retail observers, with August US comparable-store store sales declining by a better-than-expected 2% from the same month of 2008, according to the International Council of Shopping Centers Chain Store Sales Index. The result is the index’s best since September 2008.

Early August benefited from tax holiday promotions, noted some observers. But perhaps the best news that the improving numbers came despite the late Labor Day, which will move some sales into September.

“A calendar shift added about 50 basis points to the year-over-year sales performance in August, according to ICSC estimates of the net impacts,” wrote Michael P. Niemira, ICSC chief economist and director of research. “ICSC estimates that the Labor Day shift will benefit the industry by about 25 basis points in September.”

Apparel store sales declined 4.3%, its best performance since April. One of the greatest surprises was the improved showing by Gap, which posted a 3% comp store sales decline – but a 4% sales gain at its Old Navy division.

“The trend still seems to be toward value,” said Lorraine Hutchinson, specialty and department store analyst for Bank of America Securities-Merrill Lynch, in a conference call.

Ross posted a 6% gain, and Cato a 5% increase, while Abercrombie & Fitch reported a 29% comp drop.

Department-store sales declined 7.3%, its smallest drop since December 2008. Luxury stores continued to struggle, with a 12.3% decrease.

Wholesale club sales rose 1% (up 2% excluding fuel). Drug store sales rose 0.6%. Discounters declined 1%, though Target’s 2.9% drop beat analysts’ expectations.

“It may be that Target’s sales woes have begun to trough, particularly given the easier comparisons coming over the next several months and the focus they have on the ‘Pay Less’ side of their business,” wrote Leon Nicholas, director of retail insights for Cambridge, MA-based retail consultancy MVI in an analysis.

ICSC Research anticipates that September sales decline approximately 2% from the prior year.