U.S. retailers report sluggish back-to-school season

Many U.S. retailers struggled with a sluggish back-to-school season, though Wal-Mart posted higher August sales Thursday as Americans focused on buying essentials amid persistent worries about high gas and food prices.

Photo: U.S. retailers report sluggish back-to-school season

U.S. retailers report sluggish back-to-school season

As merchants announced their August sales results, Wal-Mart Stores Inc., the world's largest retailer, reported a solid gain that beat Wall Street forecasts as consumers stick to low-price operators. But mall-based apparel stores such as Wet Seal Inc., Gap Inc. and Limited Brands Inc. remained in the doldrums. And high-end retailers Saks Inc. and Nordstrom Inc. posted weaker results as their affluent customers start to feel pinched.

"Consumers are spending on necessities and looking for value and the lowest price possible. And it's reflective again in the results that we are seeing," said Ken Perkins, president of research company RetailMetrics LLC.

According to a preliminary tally by Thomson Reuters, 14 retailers missed expectations, while 12 merchants beat estimates. The tally is based on same-store sales, or sales at stores opened at least a year, which are a key indicator of a retailer's health.

The August results aren't comforting to the retail industry as it prepares for the critical holiday season. Many merchants had entered the fall season with inventories well below a year ago, but such reductions may have not been enough as last month proved to be even weaker than planned. Dan Hess, founder and CEO of research firm Merchant Forecast, estimated that discounts are 10 percent deeper at mall-based apparel stores than a year ago, despite a drop of 10 percent to 15 percent in inventories.

One encouraging piece of news is that Hurricane Gustav, which hit the Gulf Coast on Monday, wasn't as bad as analysts feared _ and that sent oil prices lower. But retailers are now getting ready for the next series of tropical storms such as Hanna, which could be become a hurricane when it hits U.S. land sometime Saturday.

Wal-Mart said Thursday that as of the day before fewer than 50 Wal-Mart stores in the Gulf Coast remained closed as a result of power outages and other issues related to the hurricane. It also noted that 13 Sam's Clubs in the Gulf Coast area that were closed for at least one day as a result of Gustav have all since reopened.

The company reported a solid 3 percent gain in same-store sales, helped by sales of groceries and back-to-school products. Analysts surveyed by Thomson Reuters had expected a 1.6 percent increase. Including fuel, the retailer's total same-store sales rose 3.5 percent

"The underlying business performance for Wal-Mart U.S. continued to show strength and the improved relative performance has resulted in market share gains," Eduardo Castro-Wright, the president and chief executive of Wal-Mart's U.S. stores, said in a statement.

Wal-Mart expects same-store sales to rise 2 percent to 3 percent in the current month.

Another bright spot is warehouse club operators as shoppers buy in bulk to save money. Costco Wholesale Corp. announced a 9 percent same-store sales increase in August on Wednesday as higher gas prices boosted sales. Analysts had expected a 9.6 percent gain. Excluding the effect of higher gas prices, Costco's U.S. same-stores sales rose 6 percent.

Among luxury department stores, Saks recorded a 5.9 percent drop in same-store sales, steeper than the 4.7 percent decline that Wall Street expected. The weakest categories were women's apparel, women's shoes and intimate apparel, while the strongest categories were fashion jewelry, fragrances, men's sportswear and men's shoes.

Nordstrom recorded a 7.9 percent drop in same-store sales,a bit worse than the 7.1 percent decline expected.

On Wednesday, J.C. Penney Co. announced that same-store sales at its department store business dropped 4.9 percent, slightly better than the 6.3 percent drop that analysts surveyed by Thomson Reuters had projected. Penney also predicted a mid- to high-single digit decrease in same-store sales for the current month.

Kohl's announced on Wednesday a 5.8 percent drop in same-store sales, though the decline was less steep than the 7.6 percent expected by analysts.

Gap Inc. recorded an 8 percent drop, though it was less steep than the 9.7 percent decline projected by Wall Street.

Limited Brands, the operator of Victoria's Secret and Bath & Body Works, suffered a 7 percent drop, mostly in line with the 6.9 percent decline estimated from Wall Street.