Mid-priced US retailers ring up rising sales

Three of the largest US department stores have provided further evidence that middle-income consumers are spending more, in spite of high unemployment and depressed house prices.

Mike Ullman, chief executive of JC Penney, said on Friday that the mid-price retailer had seen “clear signs of strength in key businesses” during its third-quarter as it reported earnings ahead of Wall Street’s expectations.

JC Penney said it expected to see comparable sales rise by 3-4 per cent during the quarter ending January 31, which would continue a slow but steady recovery in spending by its core mid-income shoppers.

The department store sector’s monthly sales this year have regularly outperformed both Walmart and Target, the largest mass discounters, who serve a predominantly lower-income customer base.

Macy’s, the largest US department store by sales, this week forecast holiday quarter sales growth in the same range, while Kohl’s, JC Penney’s main rival in the mid and lower-price range, gave a 2-4 per cent target.

Macy’s, which reported comparable sales growth of 3.9 per cent in its third quarter, highlighted the particular strength of its upmarket Bloomingdale’s chain.

Kohl’s reported that sales of its more expensive “Simply Vera” line by designer Vera Wang had grown more than 15 per cent during the quarter.

JC Penney said it had seen “clear signs of strength” in sales of cosmetics and fragrances at its 231 store-within-a-store Sephora locations.

Similar signs of sales strength during the third quarter have been reported by several retailers whose sales slumped after the 2008 financial crisis, including Whole Foods Market, the organic and natural supermarket, Starbucks, the coffee business, and Victoria’s Secret, the lingerie retailer.

Estee Lauder, the upmarket beauty brand business, also said recently that beauty sales at “prestige” department store counters and at Sephora stores, owned by LVMH, had outstripped growth at lower price drug stores and discounters during the third quarter.

Macy’s, Kohl’s and JC Penney are all still taking a strongly promotional marketing approach to the holiday shopping season, launching a series of special weekend sales offers in the run-up to the Thanksgiving holiday.

But Kevin Mansell, chief financial officer of Kohl’s, said its marketing message this year had moved away from stressing just low prices to a broader focus on value for money.

“A lot of the incremental marketing we are doing . . . is around convincing and communicating to consumers why what we give them for the price is of better overall total value,” he said.

JC Penney reported third-quarter earnings of $44m, or 19 cents per diluted share, up 63 per cent on the same period last year.

Total revenues were almost unchanged at $4.19bn, reflecting a decision to end distribution of its mail-order catalogue on the rise of online shopping.