Retail Sales Strong as Gas Prices Fall

High-End Stores Did Especially Well Last Month

Less money spent on gasoline means more money for shopping. Sales at retail stores were up significantly in September. (By Daniel Barry -- Bloomberg News)

The money people are saving at the gas pump is finally showing up somewhere else: department store cash registers.

Department stores yesterday reported booming sales for September, up 8.4 percent from September 2005 at stores open at least a year, a figure known as same-store sales.

Department stores are doing better than retailers overall. In a survey by the International Council of Shopping Centers of 57 retail chains, sales were up 3.8 percent last month from September 2005.

Retail chain-store sales growth in general has held up well this year, even as rising gasoline prices and interest rates restrained consumer spending on homes, cars and trucks, said Michael P. Niemira, the council's chief economist.

"Consumer spending has been relatively steady" at retail chain stores, said Niemira, who attributed that stability primarily to income growth, which has more influence on consumer spending at retail chains than fluctuating gasoline prices.

Still, the recent decline in oil prices, from more than $77 a barrel in mid-July to around $60 a barrel, has boosted consumer buying power and reduced the risks that economic growth might slow too much, said Nigel Gault, chief U.S. economist at Global Insight Inc., a financial forecasting firm. Falling oil prices "made a soft landing for the economy look a safer bet," he said, referring to a scenario in which the economy cools just enough to lower inflation without sliding into a recession.

The retailers' results, after reports that vehicle sales rebounded in September, supported Federal Reserve Chairman Ben S. Bernanke's statement Wednesday that the economy remains strong aside from the slumping housing market.

Enjoying that strength last month were such high-end retailers as Nordstrom Inc., which reported a 13.4 percent gain in same-store sales, and Saks Inc. with a 10 percent increase.

Other stores with strong same-store sales were J.C. Penney Co., Target Corp., Limited Brands Inc. and Federated Department Stores Inc., which reported results only for its Macy's and Bloomingdale's chains. The department-store increase of 8.4 percent for September was more than triple the August increase of 2.7 percent.

Several retailers that cater to lower-income customers posted much weaker results. Wal-Mart Stores Inc., the nation's biggest retailer, reported a relatively feeble 1.3 percent gain in sales at its Wal-Mart and Sam's Club stores open since last year. The company attributed some of the softness to the comparison with its results in September 2005, which were boosted by buying related to Hurricane Katrina in late August.

Gasoline prices affect retailers differently. Wholesalers that sell gasoline benefited as prices climbed above $3 a gallon in early August, but then they were hurt as prices fell to an average $2.31 a gallon nationwide earlier this week. BJ's Wholesale Club Inc., for example, reported a 0.9 percent decline in same-store sales in September.

A 10 percent increase in gasoline prices tends to reduce chain-store sales overall by about 0.4 percent over a year, Niemira has calculated. A similar drop in prices has the reverse effect.

But sales by retailers that cater to lower-income shoppers are more affected than average by changing gasoline prices, while there is little or no effect on high-end store sales, Niemira said. At Wal-Mart, for example, a 10 percent increase in gasoline prices cuts its sales by 0.9 percent.

Wal-Mart has blamed much of its disappointing sales this year on surging gasoline prices. But the company hasn't seen much of a bounce from falling prices.

"Where's the consumer slowdown? At Wal-Mart," Niemira said.