Retailers' hopes rise

Just in time for the holiday season, retailers' losing streak may be coming to an end.

Same-store sales in September rose by a crumb -- 0.1 percent -- yet it was the first year-over-year increase since July 2008, according to figures released Thursday by the International Council of Shopping Centers. The group's chief economist, Michael Niemira, noted that even this modicum of movement "marked a significant turning point for the industry, as well as the start of a retail recovery."

Consumers remain cautious, however, and most analysts aren't ready to proclaim victory just yet. But the results raise hopes for the crucial holiday period ahead.

"We're starting to see momentum shift," said Marshal Cohen, an analyst with market research firm NPD Group. "Discounters and anyone who offered a little value have started to show better results."

Teen retailers led the pack in September as back-to-school shoppers hit the malls. Aeropostale's monthly same-store sales increased 19 percent compared with last year, followed by gains at Old Navy (13 percent), Buckle Inc. (5.1 percent) and Limited Brands (1 percent).

Minneapolis-based Target reported a drop in sales of 1.7 percent, in line with the company's expectations, but it was one of six retailers to raise its quarterly profit outlook, joining Kohls, J.C. Penney, American Eagle Outfitters Inc. and TJX Companies.

Cohen said "frugality fatigue" is setting in as consumers grow weary of a year or more of choosing necessity over desire on their shopping trips. NPD Group won't release its holiday forecast until Tuesday, but Cohen said he doesn't foresee a drop in holiday sales. The National Retail Federation said last week that it expects sales in November and December to decline 1 percent compared with last year.

"September sales numbers showed that the consumers didn't disappear on us," Cohen said. "This holiday is not going to be as much of a disaster as last. Consumers are saying, 'The holiday is going to come, albeit my lists may be smaller, and I'll buy for less people. But I'm not automatically going to buy less expensive gifts, per se.'"

Wal-Mart shot the opening salvo in the holiday battle for consumers last week, announcing that it will offer more than 100 toys and games for $10 during the holidays. Target fired back by slashing prices by 50 percent on its most popular toys, including Barbie, G.I. Joe and Fisher-Price toys.

As for September's results, Target said sales continue to be driven by commodities such as health care, personal care and baby products. Sales in those categories rose in the low single digits to low double digits. Food sales were flat, and women's apparel and home items continued to lag. Target expects October sales to decline in the low single digits.

Third-quarter earnings will exceed analysts' estimate of 43 cents, CEO Gregg Steinhafel said in a statement. But Steinhafel remains cautious about fourth-quarter results in both its retail stores and credit card operations.

Indeed, consumers remain spooked about splurging. Consumer borrowing fell in August for the seventh consecutive month, the Federal Reserve reported Wednesday, one indication that shoppers remain more committed to staying out of debt than making big-ticket purchases. And as long as unemployment remains high -- the rate hit 9.8 percent in September, the highest since 1983 -- many shoppers will continue to keep a lid on discretionary spending.

Cohen warned that retailers who remain overly cautious in their assortment and their inventory levels risk losing out on the holidays. The back-to-basics mind-set has even washed into the fashion world, where many retailers are showing muted colors and conservative styles. Even video games have stopped innovating after two years of double-digit growth, Cohen said. It's a chicken-and-egg scenario where consumers might not be spending because there's nothing exciting to splurge on.

"We've seen lots of businesses fall short of late because they've gotten so cautious and so careful, that they've bored the consumer right out of spending some money," he said.

Jackie Crosby • 612-673-7335