A shift in weather patterns to more seasonal temperatures in mid-October appeared to be the driver for an October at retail that surprised and even shocked some of the most optimistic prognosticators of retail trends. According to a monthly survey of 71 retailers conducted by the International Council of Shopping Centers, comparable store sales for the month of October rose 4.4% versus the same month last year.
“October's sales performance was surprisingly more positive then we expected,” said Michael Niemira, ICSC's chief economist and director of research. “Despite the challenges of unseasonably warm weather earlier in the month, retailers did well, especially given the tough comparison over last year. October's sales performance highlights that there is underlying demand across sectors, and it remains relatively steady as we head into the holiday season.” But Niemira also cautioned that the strong October doesn't necessarily mean that consumers have reduced their angst, but he felt it gives retailers “a bit more confidence” that a strategy to increase promotions will deliver a better Holiday season.
Most analysts still agree that high energy costs, declining consumer confidence, the impact of the Q3 storms, and a stagnant job picture are having an impact on the consumers psyche, but the October results appear to paint a picture of a very resilient shopper heading into the all-important Holiday season. The prospect sent Wall Street running for the “buy” button as well, as most retail-related indices and stocks moved higher for the week.
“Consumers are hanging in there, despite facing significant pressure on their discretionary income” from still high energy prices, said Ken Perkins, president of Retail Metrics LLC, in a published report. “The glass is more full heading into the holiday season. The consumer doesn't seem to be tapped out.”
Wholesale Clubs (+8.2%) and Luxury (+7.3%) were again the top performers for the month, with the Wholesale Club channel getting a boost from gasoline sales. Costco was the key performer in the channel, posting a 10.0% comp store sales increase for the month. Luxury store performance was driven by Saks Fifth Avenue, which posted a strong 10% comp store sales gain for the month, Neiman Marcus (+7.0%), and Nordstrom (+6.4%).
Department stores also fared better than they have in more than a year, posting an overall comp sales increase of 3.8% for the month. Even the mid-market guys got in on the action, with Stage Stores posting a 14.9% comp gain for the month and Kohls generating a 6.2% comp store gain on top of a 6.0% increase in October last year.
Footwear Stores (+7.3%) were also a top performer for the month, thanks in large part to Shoe Carnival.
Shoe Carnivals impressive 21.2% comp sales gain for the period was the second-highest monthly gain in the companys history. Total sales increased 24.3% to $49.8 million from sales of $40.0 million last year. Carnival benefited from increases in both customer traffic and conversion rates for the month.
The womens business led the gainers for the month, posting a 40% gain for the period that was driven by the dress shoes and boots categories. Mens comps were up “just over 20%.” Childrens, which includes the childrens athletic category, increased in double-digits. Even mens and womens athletics, which had been in the doldrums, saw growth in the low-teens.
Total footwear was up 21.6% for the month, while accessories increased in low-double-digits. Gross margins were also up for the month versus last year. The retailer said that consumers responded “exceptionally well” to the fall merchandise assortment.
SCVL reported that comps for the fiscal third quarter ended October 30 were up 8.3% over last year, while total sales increased 12.3% to $182.7 million from $162.7 million in the year-ago period. Based on the October sales performance, Carnival now sees diluted earnings per share at 52 cents or 53 cents for Q3.
DSW Inc. posted a healthy gain for October, reporting an 8.9% increase in comps for the month on top of a 6.7% gain in the same month last year. Total sales increased 20.4% to $112.6 million from $93.5 million last year. The October results boosted the overall gain for the fiscal third quarter ended October 29, with comps for the period growing 3.5% on top of a 0.8% gain in the year-ago quarter. Total net sales for the period increased 15.2% to $302.2 million from net sales of $262.4 million for Q3 last year.
Zumiez Inc. continued its momentum in the month of October, posting a 10.0% increase in same-store sales on top of an 11.9% increase in October 2004. The retailer cited “much stronger” sales growth in the back half of the month that contributed to a mid-single-digit increase in comp store transactions and a mid-single-digit gain in average unit retail.
The mens business was described as the “strongest positive contributor” for the month, but the retailer pointed out that accessories, hardgoods, and juniors were all positive for the period.
Total net sales for the month increased 29.5% to $13.2 million, compared to $10.2 million for October last year. Total net sales for the fiscal third quarter ended October 29 increased 26.7% to $57.4 million, compared to $45.3 million in the year-ago period, driven by new store openings and a 9.8% increase in comparable store sales on top of the 9.0% gain posted in the year-ago period.
Pacific Sunwear of California, Inc. also got a boost in the last month of the third quarter, prompting it to raise guidance for the period. Total sales for October increased 17.4% to $88.0 million from $75.0 million in the same period last year.
Total PSUN same-store sales increased 7.9% for the month on top of an 8.5% gain in October last year, with cooler weather classifications accelerating in the back half of the month as the weather chiled throughout the country.
The PacSun concept posted an 8.8% comp store sales increase for the month, with both the guys and girls businesses comping up in the high-singles for the period. The guys increase was driven by basic denim, track jackets, s/s Ts, polos and accessories, while the girls side got a boost from knit tops, s/s Ts, basic denim, sweaters, and accessories.
At d.e.m.o., same-store sales grew 2.7% for the period, as a high-single-digit decline in the guys business nearly offset the mid-teens growth of the girls business. The girls gain was driven by knit tops, capris, shoes, and accessories, while the guys saw weakness in wovens and accessories, and positive growth in polos, denim, and T-shirts.
For the third quarter, sales grew 13.6% to $377.5 million from total sales of $332.4 million for the same period last year. Company same store sales increased 4.6% during the quarter, with PacSun same store sales up 5.1% and d.e.m.o. same-store sales up 1.0%.
Based on the stronger-than-expected October results, PSUN raised its third quarter guidance to a range of 53 cents to 54 cents per share from its previous guidance of 51 cents per share and 44 cents per share in the third quarter of 2004.
The Buckle, Inc. also saw momentum in October, posting a 4.3% increase in comp store sales for the month, but it wasnt enough to push the quarter comps into positive territory. Total sales for the month increased 9.5% to $39.2 million from sales of $35.8 million in October last year. Net sales for the third quarter ended October 29 increased 3.2% to $138.0 million, compared to net sales of $133.7 million for the third quarter of fiscal 2004. Comparable store net sales were down 0.9% for the quarter.
ICSCs Niemira is projecting an overall 3.5% comp sales increase for the retail sector for November.
