Retail sales surge in August

Consumers are a fickle bunch these days but they showed up in droves at a vast number of retailers that scored higher than expected retail sales in August.

A group of 18 retailers ranging from Target to Macy’s reported an average 6% rise in August same-store sales, according the International Council of Shopping Centers. August sales outpaced a 4.2% expected increase from data analysis firm Retail Metrics.

Thursday’s (Aug. 30) report is notable since it’s the retail sector’s best performance since March.

Back-to-school traffic helped a wide range of retailers from discounters like Target and TJX to GAP, Macy’s and Nordstrom, despite rising fuel prices and tepid reports from restaurant operators in recent months.

Researcher ShopperTrak estimates retail traffic rose 11% in August — its highest in three years.

“Despite a lot of challenging macroeconomic fundamentals, the American consumer finds these opportunities where they just pick themselves up and they go out and shop, and that’s what we saw this month,” Chris Donnelly, consultant at Accenture, told Bloomberg News. “Most retailers are beating the estimates and most of their estimates were ambitious.”

The merchants reporting monthly sales comprise about 13% of the $2.4 trillion U.S. retail industry and do not include mega-retailer Wal-Mart, who stopped reporting monthly sales more than two years ago.

Analysts still closely monitor those retailers reporting each month because they include a wide range of companies, large and small who are quite varied in merchandise and pricing.

One of the big winners in August sales was Wal-Mart’s chief competitor, Target. The company reported heavy traffic that boosted sales 4.7% to $5.543 billion for the four weeks ending Aug. 25. On this same basis, August comparable-store sales increased 4.2%.

"We're pleased with Target's August comparable-store sales increase, which was near the high end of our expected range," said Gregg Steinhafel, chairman, president and CEO of Target Corporation. "Sales were stronger in the second half of the month, as guests responded to Target's broad assortment and compelling value for their back-to-school and back-to-college shopping."

One of the strongest categories Target reported in August was food sales, an indication it is competing head-to-head with Wal-Mart for grocery dollars.

The August grocery comparison report from Raymond James analyst Budd Bugatch indicates Wal-Mart’s price advantage over rival Target continues to decline. He notes Target had stable branded prices in August versus modestly higher ones at the other retailers. The 48-item Walmart branded basket was 1% less expensive than the comparable Target basket this month, down from 3.6% in July and 1.9% a year ago.

In the apparel category, same-store sales at Gap jumped 9% beating a 5.5% expected gain by analysts. These gains were largely attributed to sales at Old Navy.

Department stores Macy’s and Nordstrom also did very well posting comparable store sales up 5.1% and 21%, respectively. Macy’s benefited from an increase in online sales while Nordstrom’s double digit gains related to the company’s anniversary sale which was moved up to August from September a year ago.

Morgan Stanley analyst Kimberly Greenberger said the August sales were the best across-the-board reading since March. She said all eyes will be focused on September sales because historically,  the August/September reports are a precursor of what to expect for the holiday shopping season.

Greenberger said a hurricane in late August last year had a slightly negative effect on the 2011 numbers and she’s waiting until the September sales are reported to give her forecast for holiday expectations.

The Commerce Department earlier this week raised its second quarter consumer spending estimate which accounts for roughly 70% of the U.S. economy. Despite the slight uptick, consumers are still expected to spend less than they did in the first quarter of 2012.

Economists say Hurricane Isaac, wide-spread drought and higher gas prices all have the potential to weigh down consumer spending in the near term.