October 30, 2009, 12:00 AM

Retail is on the road to recovery but faces bumps and detours, experts say

Heading into the holiday shopping season, retailers have some cause to celebrate but with caution: Two retail industry groups say the economy has started to revive but faces a bumpy road to robust sales

With the crucial holiday shopping season only weeks away, retailers have some cause to celebrate: the retail recovery has arrived, two industry groups are reporting. But the groups say the recovery has only just arrived, and that it will be a slow, bumpy road back to robust sales.

U.S. chain store sales in September were up by 0.1% on a year-over-year same-store basis, the strongest reading since July 2008’s 3.3% year-over-year growth, reports the International Council of Shopping Centers Inc.

“Small as that gain was, it marked a significant turning point for the industry, as well as the start of the retail recovery,” says Michael P. Niemira, chief economist and director of research for the Shopping Center Council. “To be sure, the retail recovery will be uneven and growth will be in spurts and fits, but it seems increasingly clear that it is recovery.”

For October, ICSC predicted comparable-store sales would be flat with last year’s October. The ICSC is a trade association. Its Chain Store Sales Trends report is based on a compilation of publicly available sales for 31 chain stores.

Similar strength

Consultants Retail Forward reported similar strength-and optimism. Retail Forward’s calculations showed 0.8% year-over-year growth in September, excluding Wal-Mart Stores Inc., compared to a 0.5% decline in September a year ago. Including Wal-Mart, sales were up 1.3%.

“September’s numbers are a good sign that retail sales are on a path to recovery,” says Frank Badillo, senior economist at Retail Forward. “But it will be a slow, bumpy road as shoppers are cautious about easing the grip on their spending plans.”

Retail Forward’s ShopperScape survey in September showed consumers remaining cautious. 47% of shoppers said they plan to spend less in the next month, up from 38% in August, which was the smallest share of shoppers planning to cut back since February 2008.

However, shoppers’ plans for holiday spending have picked up since last month, the ShopperScape survey reports, and are only slightly worse than they were in September last year, just before the financial crisis worsened and caused many shoppers to cut spending. Retail Forward reports:

- 46% of shoppers say they plan to spend about the same on holiday gifts as last year. That’s the same percentage as September of last year.

- 40% plan to spend less on holiday gifts than last year, an improvement from the 43% that last month said they planned to spend less. However, that percentage is slightly higher than last year’s 37% and still sharply higher than two years ago.

- 9% plan to spend more on holiday gifts than last year, an improvement from the 7% that last month said they planned to spend more. At the same time, that’s down from 13% a year ago.

kurt@verticalwebmedia.com

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