Retail sales worst in decades; holiday view cut
NEW YORK (Reuters) - Retail chains posted the worst October sales results in more than three decades as consumers cut spending sharply, stunned by a financial crisis that has derailed the U.S. economy.
The International Council of Shopping Centers called the retail sales environment "simply awful" and said the October results were the worst it had seen for that month in 35 years.
The ICSC said it pared its forecast for what were already expected to be dismal holiday season sales. It now expect sales in November and December to rise 1 percent, down from its prior view for a gain of 1.7 percent.
"The great unknown is just how much lower can consumer spending go?" said Piper Jaffray analyst Jeff Klinefelter. "With savings rates at historic lows and constraints on the availability of consumer credit, I just think there's concern that the perfect storm is brewing."
Wal-Mart Stores Inc stood out as one of the few bright spots. It posted a better-than-expected 2.4 percent rise in sales at U.S. stores open at least a year. Analysts had forecast a 1.6 percent gain, according to Thomson Reuters.
Wal-Mart's results were a sharp contrast to other discounters like Target Corp and Costco Wholesale Corp, which reported larger-than-expected same-store sales drops. Across the sector, department store chains like Nordstrom Inc and specialty clothing retailers like Abercrombie & Fitch were among those hit hardest.
Shoppers have pared purchases of discretionary items like clothes or computers and in some cases are carefully planning when they buy the most basic necessities, like baby formula.
Thomson Reuters said its October same-store sales index fell 0.7 percent, worse than its estimate for a 0.3 percent drop. Based on results from 34 retailers, 56 percent missed estimates.
To win more market share during the crucial holiday selling season, Wal-Mart said it would introduce new price cuts every week until Christmas, reducing prices on thousands of items, such as toys and food.
Wal-Mart Chief Marketing Officer Stephen Quinn told Reuters that the new initiative "takes the intensity up massively" on price cuts declared last month on popular toys.
The company's shares declined 0.5 percent, outperforming a 4.2 percent decline in the Standard & Poor's Retail Index.
While Thanksgiving weekend later this month traditionally marks the start of the holiday shopping crush, other retailers were already introducing discounts to spur early buying.
ANNTAYLOR, TALBOTS RESTRUCTURE
In a fresh sign of trouble, women's apparel retailers Talbots Inc and AnnTaylor Stores Corp said they would restructure operations after posting steep sales drops.
Analysts had expected weak October sales after the financial crisis that began in the United States in September swept across the globe, stoking fears of a deep recession.
The crisis crimped spending even among the wealthy. Same-store sales fell 16.6 percent at upscale department store chain Saks Inc and dropped 15.7 percent at Nordstrom.
Saks said its shoppers were buying discounted items instead of full-priced merchandise, hurting its margins in the just-ended and current quarters.
At high-end teen apparel chain Abercrombie & Fitch, which has said it would not lower prices in an effort to maintain the status of its brand, same-store sales fell 20 percent, worse than the 14.4 percent drop analysts expected.
AnnTaylor shares slid 25 percent, Talbots lost 9 percent. Saks fell 3.4 percent; Abercrombie gained 0.3 percent.
BJ's Wholesale Club Inc, the No 3 U.S. warehouse club operator, said October same-store sales rose 10.2 percent, helped by strong sales of gasoline at its fuel stations.
But the tough environment snagged Costco, the largest U.S. warehouse club operator. Its October same-store sales fell 1 percent, hurt in part by fewer purchases of discretionary items like jewelry or toys. Thomson Reuters said the results were the worst since it began collecting estimates for Costco in 1997.
Costco, which runs clubs in countries like Canada and the United Kingdom, also said its results were hurt by the strong U.S. dollar, which reduced the value of its overseas sales.
Wal-Mart's international unit was also hurt by the stronger U.S. dollar, but the retailer said its underlying business remains strong.
"We believe falling gas prices could help customers as we enter this holiday season," said CFO Tom Schoewe.
Wal-Mart, which will report quarterly results Nov 13, forecast U.S. November same-store sales to rise between 1 and 3 percent.
Target's same-store sales fell 4.8 percent, worse than the 2.8 percent drop forecast by analysts. It forecast a drop of 6 percent to 9 percent in November same-store sales, attributing part of the decline to a calendar shift that leaves it with fewer busy holiday shopping days in the month.
(Editing by Maureen Bavdek, Lisa Von Ahn, Richard Chang)
- Ten countries scour sea for Malaysia jet lost in 'unprecedented mystery' |
- Confrontation in Ukraine as diplomacy stalls |
- Missing Malaysian jet may have disintegrated in mid-air: source |
- Mexico kills drug kingpin reported dead years ago: official
- Pistorius vomits in court at Steenkamp autopsy details |