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Colder weather boosts October retail sales

The outlook for the holiday shopping season brightened a little Thursday, as many of the nation’s retailers reported that their sales improved in October with the arrival of colder weather.
/ Source: The Associated Press

The outlook for the holiday shopping season brightened a little Thursday, as many of the nation’s retailers reported that their sales improved in October with the arrival of colder weather.

A variety of retailers including Wal-Mart Stores Inc., Costco Wholesale Corp., J.C. Penney Co. Inc. and Nordstrom Inc. beat Wall Street expectations. Apparel retailers Gap Inc. and Limited Brands Inc. again struggled with their fashion formulas and reported disappointing sales, but analysts were nonetheless more upbeat about the holidays for the industry overall.

“Consumers are hanging in there, despite facing significant pressure on their discretionary income” from higher energy prices, said Ken Perkins, president of Retail Metrics LLC, a research firm in Swampscott, Mass. “The glass is more full heading into the holiday season. The consumer doesn’t seem to be tapped out.”

Perkins noted that 73 percent of the 53 retailers he tracks beat expectations; 25 missed expectations; and two retailers had results that matched estimates.

The International Council of Shopping Centers’ October sales tally of 65 retailers rose a better-than-expected 4.4 percent, above the year-to-date average of 3.9 percent. The tally is based on same-store sales, those from stores open at least a year.

The results were surprising given retailers’ struggles throughout October, including the effects of Hurricane Wilma and some unseasonably warm weather that slowed sales of sweaters and coats.

Analysts had been more nervous about the holiday season last month following a mixed performance in September, when consumers turned to discounters for basics but ignored mall-based apparel stores. Perkins now believes warm weather was the big deterrence, not higher energy prices.

Still, retailers are preparing for a difficult holiday season. Although gasoline prices have slipped back from $3-plus-per-gallon levels in recent weeks, they still are quite high, and home heating costs are expected to soar this fall and winter, forcing many consumers to budget carefully.

The impact of the hurricanes was evident in a Labor Department report Thursday that showed job losses related to the storms, including the most recent, Wilma, climbed to 521,400 last week.

The government announced an additional 18,000 layoffs linked to hurricanes Katrina and Rita and 1,400 layoffs related to Wilma, which pummeled south Florida on Oct. 24. The total of 19,400 storm-related claims was the smallest weekly gain in the nine weeks the government has been tracking the impact of the hurricanes on the nation’s labor market.

The combination of the storms’ aftermath, including higher energy prices, are making Americans more pessimistic about the economy, as a consumer sentiment report from The Conference Board showed last week.

Wal-Mart beats estimate
Wal-Mart had a 4.3 percent increase in same-store sales. The figure beat the consensus from Thomson First Call, which estimated a 3.0 percent gain. Total sales rose 10.5 percent.

Target Corp. enjoyed a 5.7 percent gain in same-store sales in October, besting analysts’ 4.2 percent estimate. Total sales rose 11.6 percent.

Costco had a 10 percent increase in same-store sales for the month, helped by the rise in gasoline prices as many of its stores have gas pumps. Excluding the effects of gas price inflation, same-store sales would have been up 8 percent. Analysts expected a 7.7 percent increase; total sales rose 12 percent.

Department stores had mixed results.

Nordstrom had a 6.4 percent gain in same-store sales, versus the 4.0 percent estimate. Total sales rose 8.7 percent.

J.C. Penney Co. Inc. reported a 2.4 percent gain in same-store sales in its department store business, better than the 2.0 percent estimate. Total sales rose 1.7 percent.

Federated Department Stores Inc. posted a 0.7 percent decline in same-store sales for the month, below the 1.7 percent gain Wall Street expected. Federated’s total sales, which include the acquisition of May Department Stores Inc., which was completed in August, nearly doubled. Same-store sales include only Macy’s and Bloomingdale’s locations open for more than one full fiscal year.

Terry J. Lundgren, Federated’s chairman, president and CEO, said that the company expects same-store sales to increase by a modest 1 percent to 2 percent over last year.

Talbots Inc. posted a same-store sales decline of 0.3 percent, better than the 1.3 percent drop Wall Street expected. Total sales rose 3 percent. Based on better-than-expected sales, the company raised its earnings outlook for the third quarter.

Gap suffered a 5 percent drop in same-store sales for the month, larger than the 2.8 percent decline that Wall Street expected. Total sales fell 2 percent.

“We began October with continued traffic challenges,” said Gap’s Sabrina Simmons, senior vice president, treasury. “However, traffic improved at the end of the month, likely due to favorable weather trends and the delivery of our holiday merchandise.”

Limited had a 3 percent drop in same-store sales, bigger than the 1.1 percent decline that analysts expected. Total sales slipped 1 percent.

Teen retailer Pacific Sunwear Inc. had same-store sales increase of 7.9 percent, surpassing the 1.8 percent estimate. Total sales rose 17.4 percent.