October retail sales look to capture fall momentum
SAN FRANCISCO (Reuters) - U.S. retailers are expected to post positive October sales results this week, but investors hoping for a clear signal on economic recovery could be in for disappointment, industry experts said.
Many top retail chains will report same-store sales results on Thursday, with the overall industry expected to post a 1.2 percent rise, according to Thomson Reuters data.
That compares with a 4.1 percent fall in October 2008, just weeks into a global financial markets collapse.
If the expected increase materializes, it will raise hopes that consumers are prepared to spend more during the crucial holiday season.
"Our forecast is that we are on a recovery path but the recovery path will be uneven," said Frank Badillo, a senior economist at Retail Forward. "From month to month some of these numbers will give false signals either way. We are seeing a recovery that is zigzagging in a positive direction."
But high expectations mean any disappointment in sales results could fuel a retreat by investors on stocks that have risen in recent weeks, fuelled by pockets of good news from a variety of retailers from J Crew Group Inc (JCG.N) to TJX Companies Inc (TJX.N).
"If expectations are too high, even if the absolute number shows sequential improvements, the stocks will sell off," said Needham & Co analyst Christine Chen.
The Standard & Poor's Retail Index .RLX has risen 1 percent this month, and almost 37 percent since January. That has fuelled a belief among some on Wall Street that along with positive sales, retailers may raise outlooks this week.
Cool weather and new merchandise in stores before the holidays have both fuelled spending, continuing on advances made in September, and easy comparisons with year-ago results.
Drugstore operators are expected to have fared the best in October with an expected rise of 3.4 percent, according to the Thomson Reuters data. Teen retailers face an estimated 2.8 percent same-store sales decline, driven by lingering weakness at Abercrombie & Fitch Co (ANF.N).
DATA CONFUSES PICTURES
But while sales trends have improved from a disastrous October 2008, data on the economy and consumer spending show shoppers remain tight-fisted and cautious.
On Friday, the Commerce Department reported that consumer spending fell 0.5 percent in September, the largest drop since December, following the end of the government's program to boost auto sales.
At the same time, the U.S. economy is officially out of recession with positive gross domestic product growth, according to data released on Thursday.
That means that optimism for October is tempered by realistic caution on the part of many, making sales numbers difficult to predict. Continued...
