Sunny September sales unlikely to brighten retailers' holiday prospects

Thu Oct 9, 2014 6:18pm EDT
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By Devika Krishna Kumar and Siddharth Cavale

(Reuters) - A resurgence in spending helped by an improving U.S. economy bolstered back to school season sales for retailers in September, but stagnant wages may force more discounting in the coming months, keeping pressure on margins.

September's results showed surprise growth for apparel retailers as parents and students rushed to malls and stores for the latest fashions as schools began reopening across the country.

This, however, is expected to be short lived.

"The one roadblock still unfortunately is wage growth," said Ken Perkins, president of Retail Metrics. "That has been absent all year."

American workers' hourly wages in the private sector rose just 2 percent over the past 12 months, in line with what has been seen over the past few years, and was roughly flat in September, a Labor Department report showed last week.

Consumer confidence rose in August, translating into higher sales in September, but such gains may not be sustainable in the current climate, analysts said.

"I suspect it (consumer confidence) will bounce around. It gets affected by things such as the ISIL (Islamic State in Iraq and the Levant) threat and the Ebola threat and issues that make people worry," said Hugh Johnson, chairman and chief investment officer of Hugh Johnson Advisors.

Wal-Mart Stores Inc, a bellwether of the retail industry, warned in August that heavy discounting would likely continue into the holiday shopping season as consumers were still concerned about the cost of living and employment.   Continued...

Shoppers carry their purchases along Broadway in New York City, May 11, 2008.  REUTERS/Joshua Lott