In Retail Sales, an Uplifting Drop

Retailers pulled off the best monthly sales results in nearly a year in August, the peak of the back-to-school shopping season, giving the industry a glimmer of hope for a happier holiday season.

Make no mistake: Sales at stores open at least a year -- a key measure of success in retail -- still fell 2 percent in August from a year earlier, according to an analysis by the International Council of Shopping Centers. Still, that is the smallest decline since September 2008. And in this economy, that counts as good news.

"It starts to paint this picture that maybe we're on the other side of this retail cycle, on the side of improvement," said Mike Niemira, chief economist at the trade group. "But that's only the kind of starting point."

The roughly 31 retail chain stores that reported same-store sales results Thursday did not include Wal-Mart, the biggest retailer in the country. Wal-Mart stopped reporting monthly sales in May, and Niemira estimated that the big-box behemoth would have pushed total retail sales into positive territory.

At rival Target, same-store sales dipped 2.9 percent in August from a year earlier, and the company said traffic was flat. Those results exceeded expectations and represented "meaningful improvement," the retailer said.

Drugstores and wholesale clubs performed the best last month, with same-store sales rising 0.6 percent and 1 percent, respectively. August sales at clothing stores fell 4.3 percent from a year earlier, but individual retailers reported a mixed bag of results.

Abercrombie & Fitch's sales plunged 29 percent, the biggest drop among the retailers reporting results Thursday, and American Eagle's fell 7 percent. But sales at value-oriented chain TJ Maxx jumped 5 percent in August, and shot up 9 percent at Aeropostale.

Some retailers with sales declines offered cautiously optimistic outlooks. At Gap Inc., the San Francisco-based clothing retailer that operates Gap, Old Navy and Banana Republic, same-store sales fell 3 percent, significantly better than the 8 percent drop last year. In a statement, the company said shoppers responded well to a relaunch of its denim line. Its Old Navy division got a back-to-school boost, turning in a 4 percent rise in sales last month compared with a 9 percent decline last year.

At Costco, U.S. same-store sales were flat excluding fuel. But the company pointed out that the number of flat-panel TVs sold was up 20 percent, a key discretionary purchase that many shoppers had put off. TJ Maxx described its sales for the month as strong.

"When was the last time we talked about strong?" Niemira said.

The back-to-school selling season runs from July to September, with sales peaking in August. This year, the late Labor Day holiday delayed the start date for many school districts, which likely pushed some sales from August into September.

But even taking that shift into account, retail experts said the results could hint at the return of the consumer as the industry gears up for the crucial holiday season.

"In the end, shoppers intend to hold the line on back-to-school spending, and their early plans for the December holidays are restrained," said Frank Badillo, a senior economist at consulting firm Retail Forward. "Over time, however, shoppers continue to give encouraging signs that they are slowly easing their iron grip on their spending plans."

The National Retail Federation, an industry trade group, estimates that back-to-school spending for students in kindergarten through 12th grade will average $548.72 per household, down 7.7 percent from last year. Total back-to-school sales are projected to reach $17.42 billion. According to a survey by the group, 85 percent of shoppers said they are cutting back because of the recession.

In response, many chains have reduced the amount of merchandise in their stores to prevent the need for costly markdowns. They've also introduced some lower-priced items to cater to shoppers' desire for value.

"They've definitely created a sense of scarcity with a lot of products," said Chandi Neubauer, an analyst with Majestic Research. "They're getting some full-price selling."