Consumers go on buying spree in October
NEW YORK (AP) – The nation’s retailers got a welcome surprise in October as the arrival of cold weather sent consumers on a buying spree and raised hopes that the holiday season might be better than expected. Business was good even at struggling Gap Inc., which reported its best sales performance in almost three years. As the nation’s largest retailers released their monthly sales figures Thursday, discounters and moderate-priced stores fared the best. Wal-Mart Stores Inc. and Kohl’s Corp.’ announced results that exceeded Wall Street expectations.
Gap and other mall-based apparel stores performed well. Gap reported its first gain in sales at stores opened at least a year, known as same-store sales, since April 2000, when it reported a 7 percent increase. Gap recorded an 11 percent gain October, far better than the 0.6 percent increase analysts forecast. Total sales were up 17 percent.
Same-store sales are considered the best gauge for a retailer’s health. But department stores again languished, with the exception of J.C. Penney Co. and Nordstrom, both of which reported results that pleased Wall Street.
“Is the retail industry finally on the mend? It appears that tentatively, the answer could be yes,” said Michael P. Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd., whose same-store sales tally was up 3.2 percent for the month. That was a percentage point above Niemira’s expectations.
“You have your weak areas, but you have gotten some good strength in apparel and footwear,” he continued. “You are starting to see some life in the industry.”
In fact, Niemira now believes that merchants could post same-store sales for the holiday period at the high end of his forecast, which ranges from a 2 percent gain to a 3.75 percent increase. Previously, he thought it would be more likely that results will come in at the low end of his range.
“The report gave a much more upbeat assessment of the future,” he said. A slew of retailers, including Penney, Gap, AnnTaylor Corp., Talbots Inc. and Hot Topic Inc., all announced Thursday they were upgrading their earnings forecasts for the third quarter.
One of the most dramatic revisions came from Gap, which said profits will be in the range of 12 cents to 14 cents a share. Analysts surveyed by Thomson First Call expected 6 cents per share.
Gap reports its results on Nov. 14.
The better-than-expected results from retailers came as the government released two upbeat economic reports.
The Labor Department said new claims for unemployment benefits dropped last week by a seasonally adjusted 20,000 to 390,000, the lowest number since early October.
The Labor Department also reported that productivity, a vital element in the economy’s long-term health, grew at an annual rate of 4 percent in the summer. It was the strongest performance since the beginning of this year.
Of course, given so much economic uncertainty, analysts are watching to see how consumers will behave in the crucial November and December months, which combined account for 23.8 percent of merchants’ annual sales.
Certainly, (the cold spell) helped propel consumers to buy the merchandise, and it’s a first boost for retailers in the last six weeks,” said Walter Loeb, president of Loeb Associates, a retail consulting company.
“But going forward, retailers will have a hook out to lure consumers with strong promotions.”
He added that consumers are concerned about the prospect of war in Iraq and unemployment.
Some retailers reported pockets of weakness.
In a statement, Alan J. Lacy, the chairman and chief executive officer of Sears, Roebuck and Co., blamed the weak economy on sluggish sales of big-ticket items, such as home appliances, lawn and garden, home electronics and jewelry.
The company, however, was pleased with the apparel business, which experienced “substantial improvement.”
Sears reported a same-store sales decline of 10 percent, much worse than the 6.6 percent decline Wall Street had forecast. Total sales were down 7.5 percent.
Here are selected same-store sales for October for leading retailers:
-Federated Department Stores Inc., same-store sales were up 0.3 percent; total sales climbed 2.4 percent.
-Kohl’s, same-store sales were up 18.3 percent; total sales increased 38.4 percent.
-Limited Inc., same-store sales were up 3 percent; total sales were up 4 percent.
-Talbots Inc., same-store sales were up 1.7 percent; total sales increased 4 percent.
-Target Corp., same-store sales were up 1.5 percent; total sales were gained 9.8 percent.
-Wal-Mart, same-store sales were up 3.7 percent; total sales climbed 11.3 percent.