The outlook for the holiday shopping season grew bleaker Thursday after retailers announced disappointing October sales results due to consumers’ ongoing worries about housing and higher energy prices.
The downbeat news came from all sectors including mall-based apparel stores like Limited Brands Inc. and department stores like Macy’s Inc. Even upscale Nordstrom Inc. posted a rare sales decline while Wal-Mart Stores Inc., the world’s largest retailer, posted sales below expectations despite its aggressive discounting heading into the holidays.
“Overall, the sales trend continues to slow,” said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass. “I think the consumer is certainly feeling the (economic) pressure heading into the holidays.”
Milder than normal weather continued to hurt store sales, wiping out consumers’ appetite for winter wear.
According to Thomson Financial, 24 retailers missed expectations, while 12 beat projections. The tally is based on same-store sales, or sales at stores open at least a year, considered a key indicator of a retailer’s health.
With Dec. 25 about seven weeks away, the retail industry is struggling with consumers’ eroding confidence and a weakening sales trend amid mounting problems in the economy. Throughout the year, shoppers have been faced with higher gas and food bill and depreciating value of their homes. Tighter credit has also become an issue in recent months. And while last week’s move by the Federal Reserve to cut a key interest rate by a quarter-point will make it cheaper to borrow money, economists say it may be too late to help boost holiday spending.
Amid such challenges, many stores including Wal-Mart and Toys “R” Us Inc. aimed to jump start the season early this year by offering door busters and big discounts starting last weekend. But shoppers don’t seem to be in a hurry to buy.
Wal-Mart posted a 0.4 percent gain in same-store sales, below the 1.1 percent gain expected by analysts polled by Thomson Financial. Wal-Mart said sales of Halloween merchandise were solid across all departments, but seasonal categories related to cold weather including apparel and home furnishings were weak.
The company forecast that same-store sales growth will be no more than 2 percent in November. Wal-Mart, which kicked off its holiday discounts with price cuts on toys in early last month, promised it will continue to be aggressive in its price cutting throughout the season.
Rival Target Corp., which stumbled in September with disappointing results, fared well in October, posting a 4.1 percent gain in same-store sales, above the 2.5 percent forecast.
Costco Wholesale Corp. had a 9 percent gain in same-store sales, well exceeding the 5.7 percent estimate. But results at the company, which sells gasoline at its warehouse stores, were inflated by an uptick in gas prices in October, from a year ago. Excluding gas price inflation, sales would have been up 5 percent.
Among department stores, Nordstrom, which reported a weaker-than-expected 3.2 percent same-store sales gain in September, posted a 2.4 percent drop in October. Analysts expected a 1 percent gain.
Saks Inc., which operates Saks Fifth Avenue, posted a 10.6 percent gain in same-store sales, well exceeding the 5.4 percent estimate.
Macy’s posted a 1.5 percent decline in same-store sales, worse than the 0.6 percent projection.
J.C. Penney Co. had a 1.8 percent decline in same-store sales in its department store business; analysts expected a 0.6 percent increase.
“Our customers are clearly facing headwinds that are impacting both sentiment and discretionary spending levels, including weak housing market conditions, high energy prices, and uncertainty in the mortgage and credit markets,” said Myron E. Ullman, III, chairman and CEO of Penney.
Penney stuck with its third-quarter outlook but reduced its sales expectations for the remainder of the year to reflect the weak spending environment. Fourth-quarter same-store sales are expected to decline in the low single digits.
Kohl’s Corp. posted a 3.8 percent drop, dragged down by weak sales in weather-sensitive businesses such as outerwear, fleece and sweaters. Analysts expected a 0.5 percent gain.
Limited had a 6 percent drop in same-store sales, worse than the 1.6 percent drop Wall Street expected.
Gap Inc. had an 8 percent decline in same-store sales, worse than the 4.5 percent forecast.
Pacific Sunwear of California Inc.’s 0.8 percent decline in same-store sales was worse than the expected 2.8 percent increase.