November 4, 2010 / 12:20 PM / 9 years ago

October retail sales signal momentum for holidays

NEW YORK (Reuters) - U.S. retailers from discounter Target Corp (TGT.N) to teen apparel chain Zumiez (ZUMZ.O) reported October same-store sales above Wall Street expectations, helped by unique merchandise and cheap prices.

A man carries shopping bags in Santa Monica, California, October 11, 2010. REUTERS/Lucy Nicholson

October results, which were in line with Wall Street estimates for the industry, appeared to bode well for some retailers during the holiday shopping season in November and December, when many generate a significant chunk of annual sales.

“I think there is decent demand going into the holidays” said Ken Perkins, president of research firm Retail Metrics, “Consumers have been relatively cautious in purchases all year long, and they have been looking ahead to the holidays.”

Based on reports from 28 retailers tracked by Thomson Reuters, 14 beat expectations, while 10 missed. The average same-store sales rise of 1.6 percent across the sector matched analysts’ estimates.

The October same-store sales rise marks the 14th consecutive month of increases for U.S. retailers, after a year of declines during the recession.

The International Council of Shopping Centers forecast November sales would rise 3 percent to 4 percent.

But industry experts cautioned that improving demand at some chains does not imply industrywide strength going into the holiday season, as shoppers remain extremely selective.

“We’ve been saying that consumers are buying what they need to buy, not doing a lot of spending on spur-of-the-moment items,” said Russell Jones, a director at consulting firm AlixPartners. “You’re going to need to have a compelling offer, whether it’s discounts or merchandise, to get people to come into stores.”

Zumiez and Victoria’s Secret and Bath & Body Works parent Limited Brands Inc LTD.N posted some of the biggest gains, prompting them to raise their earnings estimates for the October quarter.

Analysts have praised both chains’ merchandise choices. While many see Limited as a destination for customers seeking smaller gifts, Zumiez has found many fans by carrying unique brands.

Zumiez same-store sales rose 21.5 percent in October, ahead of analysts’ estimates of a 7.8 percent increase.

Limited same-store sales rose 9 percent, compared with Wall Street’s forecast of a 6.1 percent gain. Its profit outlook for the full quarter was ahead of Wall Street estimates.


Department store chain Macy’s Inc (M.N) also counted on exclusive brands and targeted merchandising to woo shoppers. It reported a same-store sales rise of 2.5 percent in October, beating analyst expectations of a 1.6 percent increase.

The company said it had benefited from exclusive brand launches, such as Kenneth Cole Reaction sportswear, and the My Macy’s program that tailors merchandise to local stores.

“While we experienced some softness in sales early in October given the unseasonably warm weather, we ended the month with a strong trend going into the holiday selling season,” Macy’s Chief Executive Officer Terry Lundgren said.

Retail stocks have underperformed the wider market in the past month. From the beginning of October through Wednesday, the Standard & Poor's Retail Index .RLX was up 1.9 percent, compared with a 3.7 percent increase for the S&P 500 .SPX.

In morning trading, the retail index was up 1.9 percent. Zumiez shares were up 12.6 percent, while Limited rose 3.2 percent and Macy’s gained 4.0 percent.

Despite unseasonably warm weather in most parts of the United States in October, Costco Wholesale Corp (COST.O), Buckle Inc (BKE.N) and other retailers also beat expectations.

Costco reported a 6 percent rise in October same-store sales, while analysts were expecting a 4.6 percent increase. Target saw same-store sales rise 1.7 percent, just above a Wall Street view of 1.5 percent.

Drugstore chains and teen apparel retailer Hot Topic Inc HOTT.O were among those that missed expectations.

Retailers got little help from Halloween-related sales toward the end of the month, evident from lackluster results at drugstore chains like Walgreen WAG.N and Rite Aid (RAD.N).

Hot Topic’s decision to winnow out its older styles like corsets and fishnet shirts hurt business ahead of Halloween, when some shoppers traditionally visited its stores for their costumes.

Additional reporting by Jonathan Lentz, Helen Chernikoff, Martinne Geller, Ben Klayman and Abhishek Takle; Editing by Michele Gershberg, Lisa Von Ahn

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