US retailers beat sales forecasts

Source: FT

By Barney Jopson in New York

Aug 30th

Gap and the owners of Victoria's Secret and TJ Maxx reported sharp sales growth in August as US retailers reported another strong month in spite of economic uncertainty.

Sales rose by 5.4 per cent among the 20 or so retailers that report monthly figures, beating expectations for the second consecutive month, according to Retail Metrics.

August is the crux of the back-to-school shopping season, the second-most important part of the year for many clothing retailers after the end-of-year holidays.

"The US consumer continues to surprise everyone with their ability to dig deep," said Chris Donnelly, head of the retail practice at Accenture.

"There's no fundamental reason why spending should be so high," he said, alluding to stubbornly high US unemployment and meagre economic growth. "It has to be psychological."

Roughly 90 per cent of retailers reported sales that beat market forecasts. Clothes sales at both department stores and speciality chains were especially strong.

Like-for-like sales at Gap climbed 9 per cent from the same month last year following a 10 per cent rise in July, as its newest clothes click with consumers after a long period of criticism for uninspiring fashions.

Sales at Limited Brands, which owns the lingerie store Victoria's Secret and Bath & Body Works, were up 8 per cent.

While Victoria's Secret does not see the same back-to-school peak as other retailers, its Pink brand for college students - which includes backpacks as well as underwear - does get a new-term kick.

The TJX Companies, which include the discount clothes and homeware chain TJ Maxx, posted an 8 per cent rise in sales. Costco, the supermarket warehouse club, reported a 6 per cent rise in August sales.

Retailers continued to rely on coupons and discounts to woo shoppers as many consumers justify spending only when they see a bargain, said retail analysts, a trend that is cutting into profitability.

Nancy Liu, retail strategist at Kurt Salmon, said: "Back-to-school is a time when people need to go back and spend. But we're still a little bit touch and go with the economy."

Sales had been flat in June but rose 4.3 per cent in July.