US shoppers show caution

November 4, 2011 at 12:00a.m.

Los Angeles Times

LOS ANGELES

The nation’s retailers recorded a modest increase in sales last month as consumers reined in their spending and cautiously sized up the coming holiday season.

With concerns about an uncertain economy and high unemployment, shoppers heading into the holiday season said they would spend carefully. Many said they are planning to keep their eyes peeled for discounts in the coming weeks and open their wallets only for good deals.

On Thursday, major chain stores reported a 3.4 percent sales increase in October compared with the same month a year earlier, according to Thomson Reuters’ tally of 22 retailers. The results fell below analysts’ expectations of a 4.5 percent bump, raising worries that consumer spending would stagnate during the holiday season.

All told, about two-thirds of retailers reported sales that fell below expectations. The worst showing was by teen apparel chain Wet Seal Inc., which posted a 9.7 percent decline. Struggling apparel giant Gap Inc., operator of the Gap, Banana Republic and Old Navy chains, saw sales drop 6 percent.

The month’s top performers reflected a mix of retail categories. Leading the pack was Costco Wholesale Corp., which posted a 9 percent gain. Limited Brands, parent to the Victoria’s Secret and Bath & Body Works chains, said sales rose 6 percent. Luxury department store Nordstrom Inc. reported a 5.4 percent rise, and off-price retailer Ross Stores Inc. saw sales increase 5 percent.

The percentage changes are based on sales at stores open at least a year, considered an important measure of a retailer’s health because it excludes the effect of store openings and closings.

Also, worker productivity rose in the July-September quarter by the most in a year and a half, the Labor Department said. At the same time, labor costs fell.

October results “reflected the angst and anger that the prolonged nature of the recession and high unemployment has had on consumers,” said retail expert Ken Perkins, president of research firm Retail Metrics Inc. “It was a bit of a surprise, since up until now there’s been an absolute divergence in low consumer expectations and yet better-than-expected store sales.”

Analysts are divided on what October’s moderate increase means for holiday spending in November and December. Some experts say last month’s showing is merely a bump in the road after months of robust spending. Others see signs of trouble ahead during the crucial season for retailers.

Some point out that October is not a good predictor of future consumer spending because it’s traditionally a slow time for merchants as they gear up for the holidays. Sales were partly hampered by unusually warm weather early in the month as well as by heavy snowstorms in the Northeast, which could push some fall shopping into November.

Others worry that the sluggish economy, weak job market and debt troubles in Europe were finally putting a damper on people’s enthusiasm to shop, which has lately fueled a surprising streak of strong sales growth.

“Overall, we’re starting to see that the level of consumer confidence is not so high, and that is probably starting to reflect in how much consumers are willing to spend,” said Hana Ben-Shabat, a partner in the retail practice at consulting firm A. T. Kearney.

(EDITORS: STORY CAN END HERE)

Industry experts say signs point to a decent holiday season, but one weaker than last year. The National Retail Federation, a trade group, forecasts that sales will rise 2.8 percent in November and December, compared with a 5.2 percent jump in the same two-month period a year earlier. Shoppers are expected to spend an average of $516 on gifts, a 4.6 percent drop from a year earlier. Spending on themselves and other items make up the difference.

In coming months, retailers are expected to aggressively court shoppers, analysts say. Consumers have been trained by consecutive years of heavy discounts to expect good bargains, and many will be comparing prices in stores and online.

Macy’s Inc., Kohl’s Corp. and Target Corp. have announced plans to open at midnight for the first time on Black Friday, the day after Thanksgiving. To whet shoppers’ anticipation, Wal-Mart Stores Inc., the world’s largest retailer, will hold a sale Saturday offering deals it says are usually found only on Black Friday.

“They are fighting for every consumer and pulling out all the stops,” Perkins said. “They will do anything to get shoppers.”

Panthea Heydari, 25, browsing at the Westside Pavilion this week, said she is being cautious as the holidays approach. She said she has cut her spending lately to save up to start graduate school next year.

“I’m definitely going to spend less this Christmas,” said the West Los Angeles resident. “Times are tough, especially for students.”

———

Visit the Los Angeles Times at www.latimes.com

Distributed by MCT Information Services