Retail Posts 2.4% Gain

Shoppers spent tentatively in September for the fourth month in a row, and retailers posted only modest sales gains as the back-to-school season chugged to a close.

Although a 2.4% increase in major retailers’ comparable-store sales outshined August’s gloomy results, it didn’t offer any hint that Christmas shopping would get off to a roaring start.

Gains from a late Labor Day, which pushed more school shopping than usual into September, were offset by the negative effects of high gasoline prices and marauding hurricanes, according to the International Council of Shopping Centers’ tally of 71 chain stores, which was released Thursday.

Many Americans were pinched by what they had to pay at the pump and that, along with their worries about the threat of terrorism and other global uncertainties, created an “economic wedge” that kept many from spending freely, said Sung Won Sohn, chief economist with Wells Fargo & Co.

“The holiday shopping season may not be all that great unless we can chop away at that economic wedge -- which may not be that realistic,” he said.

As for California-based retailers, Gap Inc., the San Francisco parent of more than 3,000 Gap, Old Navy and Banana Republic stores, logged a disappointing 3% decline in same-stores sales, or sales at stores open at least a year. Wet Seal Inc. in Foothill Ranch suffered an 8% same-store drop and lowered expectations for the third quarter, saying it expected a net loss of about 83 cents a share.

On the flip side, Bebe Stores Inc. of Brisbane blasted past Wall Street’s expectations by reporting a 17.6% increase and boosting expectations for the fiscal first quarter to 24 cents to 27 cents a share. Also surpassing analysts’ projections, Anaheim-based Pacific Sunwear of California Inc. logged a 9.8% gain as teens continued to swarm to its PacSun stores. Los Angeles-based Guess Inc., which has been featuring celebrity Paris Hilton in a sexy fall ad campaign, reported last week that its same-store sales jumped 13.6% in September.

The Morgan Stanley index of 38 retail stocks rose just 0.01% on Thursday. Bebe’s stock hit a 52-week high of $24.41 during Nasdaq trading before closing at $24.16, up $2.58, almost 12%.

Nationwide, as a group, drugstores and wholesale clubs led the retail pack with gains of 7.1% and 6.6%, respectively. And higher end retailers tended to hold their own, with Seattle-based Nordstrom Inc. reporting a 6.2% same-store increase, twice what analysts expected, and Neiman Marcus Group Inc. in Dallas gaining 6.3%. Saks Inc. in Birmingham, Ala., however, posted a disappointing 4% drop.

Companies with stores catering to lower income consumers didn’t fare terribly well in general. Wal-Mart Stores Inc., the world’s biggest retailer, logged a 2.4% gain and Sears Roebuck & Co. in Hoffman Estates, Ill., dropped 3.2%.

Michael Niemira, chief economist for the International Council of Shopping Centers, predicted same-store sales would rise 3% to 4% in October -- because the comparison with October 2003 will be so much easier than to September 2003.

The year-ago September was when tax cuts and home refinancing helped boost same-store sales 5.9%, a tough figure to match. “Now all the tax cutting is past tense and refinancing activity is much lower than it has been, so consumers are much more dependent on their labor income to support their spending,” said Scott Hoyt, an economist with the consulting firm Economy.com Inc.

According to some experts, the back-to-school shopping season signals what retailers can expect during the Christmas holidays. If that’s true, this year’s August and September results are bad omens. In August, same-store sales rose a scant 1.1%, the smallest gain in 18 months.

On the other hand, last year, strong retail sales in the fall didn’t hold up through the holidays.

“I think we’ll probably have the flip of that story this year -- back-to-school not as good, Christmas stronger,” Niemira said.

Consumers have money to spend, should they feel like breaking loose, because income increases have been outpacing spending in recent months, said economist Sohn.

Dividend income, for example, increased 7% to 8% this year over 2003, Niemira said. He suggested that the one-time dividend payment totaling $32 billion that Microsoft Co. plans to dole out to shareholders in December -- the largest such payout in history -- could be converted into a Christmas bonus for retailers.

“It may be the ace in the sleeve of the consumer,” he said.

Mixed bag Percentage change from a year earlier in September sales at stores open at least one year

Company % change Guess +13.6% Pacific Sunwear +9.8 Nordstrom +6.2 Gottschalks +6.0 Target +5.6 Wal-Mart +2.4 J.C. Penney +2.0 Hot Topic +1.1 Federated +0.1 May -1.5 Gap -3.0 Sears -3.2 Limited Brands -5.0 Ross -5.0 Wet Seal -8.0

Sources: Times wire services, company reports