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October sales offer some relief to retailers

Consumers, enticed by cooler weather, early holiday discounts and an improving economy, spent a little more in October.
Retail Sales
October sales reports from major retailers are mixed as shoppers remain restrained by tight credit and a weak job market.Mel Evans / AP
/ Source: The Associated Press

Consumers, enticed by cooler weather, early holiday discounts and an improving economy, spent a little more in October, handing the retail industry its second consecutive monthly sales gain after more than a year of declines.

Even affluent shoppers, who had been tight with their purses since the financial meltdown ballooned last year, spent more for designer duds.

As merchants announced their figures Thursday, the results showed that shoppers still were not splurging, restrained by tight credit and a weak job market. But the improving figures and tone of the reports all pointed to sales momentum, encouraging as the industry heads into the holiday shopping season.

Among the bright spots were Costco Wholesale Corp.; TJX Cos., which operates T.J. Maxx and Marshalls; and Gap Inc., all of which reported solid gains for October. But the biggest surprise were improving sales at luxury retailers like Saks Inc., and Nordstrom Inc.

"Improved macro conditions are leading shoppers to spend more on discretionary purchases," said Ken Perkins, president of retail research firm Retail Metrics."This should bode well for Christmas."

According to the International Council of Shopping Centers-Goldman Sachs tally, sales at stores opened at least a year rose 2.1 percent, compared with a 4.2 percent drop in October 2008.

The October results marked the industry's strongest performance since July 2008 and beat estimates for a 1 percent gain. October's gain followed a surprising 0.6 percent increase in September.

Sales at stores open at least a year are considered a key indicator of a retailer's health.

October's reading excludes results from Wal-Mart Stores Inc., the world's largest retailer, which stopped issuing monthly sales reports earlier this year.

Business was helped by a number of factors. Cooler weather helped boost sales of plaid shirts, leggings and boots. And early holiday discounts also may have drawn shoppers to get a head start on Christmas buying. Those with money are now becoming a little more willing to spend it, soothed by improving signs in housing and the stock market.

But retail sales figures are also starting to look better because they are being compared with the free fall in spending a year ago.

Analysts still have plenty of concern about the fragility of American consumers who continue to grapple with tight credit and weak employment. More than 6 million additional people were jobless in September 2009 than in September 2008.

The Labor Department reported Thursday that the number of newly laid-off workers filing claims for unemployment benefits last week fell to the lowest level in 10 months, evidence that job cuts are easing. But employers are reluctant to hire and economists expect unemployment to tick up to 9.9 percent when October's figure is reported Friday.

As a result, consumer confidence has been choppy in recent months, rising above its February low, but still far from levels that would mean the economy is on solid footing.

Against the uncertain economic backdrop, discounters and wholesale club operators continue to benefit as shoppers still want low prices and necessities.

Costco said Thursday that sales at stores open at least a year climbed 5 percent in October, helped by strengthening foreign currencies. Analysts surveyed by Thomson Reuters had expected a 4.7 percent gain.

Target Corp. posted a 0.2 percent decline in October; analysts had expected results to be unchanged from a year ago. The retailer said that sales of necessities like health care products rose, but electronics and sporting goods sales were weaker.

Children's Place Retail Stores, Wet Seal Inc. and Stage Stores Inc. also all reported declines. Limited Brands Inc., which operates Victoria's Secret and Bath & Body Works, reported a bigger-than-expected sales drop of 4 percent.

But many apparel chains are starting to see their fortunes improve as shoppers treat themselves a little more.

Gap Inc., boosted by surging sales at Old Navy, reported a 4 percent gain in October.

Among department stores, Macy's Inc. posted a 0.8 percent decline in sales at stores open at least a year. J.C. Penney Co. had a 4.5 percent sales drop, worse than the 2.3 percent decline that analysts anticipated. The company said that women's apparel and shoes were top performers, but fine jewelry continued to experience weaker sales.

Nordstrom enjoyed a 6.5 percent gain, better than the 3.0 percent estimate. Saks posted a 0.7 percent sales gain, much better than the 3.6 percent drop that Wall Street had expected.

Saks' release described business as still "weak," but several categories like women's designer sportswear, outerwear and jewelry all showed relative strength, along with its online and Off 5th businesses.