Retailers report disappointing September sales

AP Business WriterNEW YORK (AP) -- Consumers already spooked by a slowing economy retrenched further following last month's terrorists attacks, leaving retailers with their weakest September sales performance in two decades.

As the nation's largest merchants reported their sales figures Thursday, it was clear that the gap again widened between discounters, particularly Wal-Mart Stores, and department and specialty apparel stores as more consumers flocked to value-oriented chains. But some stores, including arts and crafts retailer Michael's, reported strong results as consumers retreated to their homes.

Consumer spending that stalled after the attacks has since rebounded to near-normal levels. But Wall Street analysts and retail executives said they remain wary about the holiday season, given the uncertain economic and political environment.

"Even before Sept. 11, retail sales would have been mediocre at best. The attacks worsened the economic situation," said Kurt Barnard, president of Upper Montclair, N.J.-based Retail Trend Report, citing more massive layoffs and a plummeting stock market.

Barnard said "consumers are going back to shopping, regaining some sense of normalcy." But he cautioned, "If there should be another terrorist attack in the U.S., all bets are off."

Jeffrey Feiner, managing director of Lehman Brothers, said his company's retail index, which tracks 22 companies, registered its lowest September reading in 20 years.

He said he is halving his holiday forecasts to a 2 percent gain.

"We are very cautious," Feiner said.

In a separate report, the Labor Department said new claims for state unemployment insurance took a sharp dip last week but remained high, reflecting the effects of the ailing economy and the terrorist attacks.

Wal-Mart, which is taking market share away from department stores, reported a robust 6.3 percent gain in sales at stores open at least a year. Same-store sales are considered the best indicator of a retailer's strength. Wal-Mart's total sales were up 14.8 percent.

Department stores, particularly Federated Department Stores and Dillard's, and specialty apparel stores again languished as consumers cut back apparel and other discretionary purchases.

Meanwhile, Michael's said its same-store sales rose 10 percent, while total sales were up 18 percent.

September accounts for 9.4 percent of retailer's annual sales, making it the third most important month of the year, behind December and June, according to Michael Niemira, vice president of Bank of Tokyo-Bank of Mitsubishi Ltd.