RETAILERS REPORT SALES GAINS DURING BTS

SN STAFF

An SN poll of supermarket operators revealed that many enjoyed a boost in back-to-school spending this year, as retailers in general appeared to feel more positive about sales trends.

Supermarkets were promoting everything from lunch boxes to stationery for BTS and many retailers reported consumers appeared more willing to spend money.

Leading last week's wave of positive indicators about retail sales was Wal-Mart Stores, Bentonville, Ark., which said tax-rebate checks and the reduction in the tax withholding rate drove more shoppers into its stores and created higher basket rings during August. The company said same-store sales growth would be 4% to 6% in the month, up from previous projections of 3% to 5%.

A survey of retail executives by the National Retail Federation, Washington, also noted that industry leaders were encouraged by strong back-to-school sales and were optimistic about the next six months. The U.S. Commerce Department reported solid total July retail sales across all sectors, up 1.4% seasonally adjusted for the month.

Other indicators also pointed toward an improving economic climate for retailers, as consumer confidence accelerated in July. According to the monthly survey released last week by the Conference Board, a better-than-expected 4.3% gain brought the consumer confidence index to 81.3.

Diane Swonk, chief economist, BankOne Corp., Chicago, said the current economic uptick appears to carry more weight than previous false starts that have occurred during the past few years. She also said this year's tax cuts should increase spending more than the rebates issued in 2001 because this year's cuts and rebates -- some 25 million checks for $400 sent to families with children -- were weighted toward moderate-income households, which are more likely to spend their windfall than higher-income consumers.

"We already had an acceleration in spending before the tax rebates, but after the tax rebates it accelerated quite sharply," she told SN last week. "Back-to-school seems to be going very well.

Last year, retailers declared there was no back-to-school season any more, but all of a sudden it's back."

She said the economy was "moving into a period of much more sustainable growth" despite unemployment concerns and rising fuel prices.

Many supermarket executives told SN they had strong sales in recent weeks. If consumers had extra dollars in their pockets as a result of President Bush's tax-cut package, at least some of those dollars were spent in supermarkets, executives said.

"The average family is probably going to look at it as a bonus," said John Catsimatidis, chairman, president and chief executive officer of Gristede's Foods, New York. "They'll spend some of it for bigger, better meals at home or for back-to-school clothing at other retail stores."

Ron Pearson, chairman and CEO, Hy-Vee, West Des Moines, Iowa, told SN in the second week of August that the chain had just come off "one of the best weeks in the history of the company."

"My suspicion is that the tax checks had something to do with that," he said.

Pearson said Hy-Vee was encouraging customers to cash their tax refund checks. "It's all over the stores. We've got signs up, telling people they can cash their checks here." Hy-Vee is tying tax refunds in with back-to-school promotions, with displays and merchandise prominently featured throughout the stores.

Mark Oerum, partner in HOWS Markets, a four-store chain in Southern California, said he hopes consumers will spend part of their tax credit checks at the supermarket, "but I believe most will treat it like a tax refund and sock it away in the bank -- I'm not sure if they'll go out and buy more groceries."

As for back-to-school, Oerum said it's gotten harder to measure the impact of BTS sales because schools in different areas of Southern California start at different times.

Jack Brown, chairman, president and CEO of Stater Bros. Markets, Colton, Calif., said his company has been cashing federal checks for years, "and our customers know it, so they know they can cash the tax credit checks with us, and we've been cashing them for the past three weeks or so."

He said he believes some customers are spending some of that money at Stater Bros. "When they're in the store cashing the check, if they see something they need, they're apt to buy it from us."

He said he expects back-to-school sales to be good this year, not too different from last year. "The fact there is additional money [from the tax checks] available for families to spend means they'll probably spend that money on BTS purchases," he said. "And with population growing in many of the San Bernardino-Riverside areas where we have stores, with a lot of new students entering schools, we should see strong BTS sales this year."

In addition to stationery, Stater promoted lunch buckets, thermoses, freezer bags and Lunchables as part of its BTS program, Brown said.

At Dick's Supermarkets, Platteville, Wis., newly elected President and CEO Richard Taggart told SN last week that August sales were strong at his eight-store chain, which is a division of Fresh Brands, Sheboygan, Wis.

"We have noticed an uptick in business in the last three weeks, but I don't know if it's [the tax cuts] or just back-to-school in general."

Rich Savner, spokesman for Pathmark, Carteret, N.J., said it was tough to gauge the impact of the tax rebates on spending at food stores, citing the effects of vacations and the blackout in the Northeast.

"There is probably little uptick [in BTS sales] from last year. Last year was a good year and we look to build from there," he said.

Curt DeVries, director of marketing, Harding's Friendly Markets, Plainwell, Mich., was not counting on consumers spending their tax rebates on food at Harding's 32 stores. Instead, he believed spending would be invested in higher-ticket items related to home improvement.

The BTS season started strong, he said, although he declined to give a specific percentage increase.