Just in time for the holidays, it seems the retail climate may finally be warming, but retailers and the market remain cautious going into the Holiday shopping period. October same-store sales surged 2.1%, marking the second straight month of positive comps and the biggest comp gain since April 2008 (+3.3%), but many retailers saw many of the gains due to weather, as the U.S. posted the second coldest temperatures for the month in 33 years, according to data from Weather Trends International (www.wxtrends.com), and the one of the top five wettest months in 114 years.
Prior to September’s 0.1% growth, the retail market had endured 13 straight months of year-over-year comp sales declines. Still, many analysts warned that results – which narrowly outpaced expectations — may be slightly inflated due to misleading comparisons against a dismal October 2008 (-4.2%). In fact, despite notable strength from discounters and surprisingly positive growth from the luxury sector, more than half of all reporting retailers fell short of Wall Street expectations for the four-week fiscal month.
As had been the case in recent months, comps gains were partially offset by continued weakness in the department stores and teen retailers segment, which declined 1.1% and 6.6%, respectively. Surprisingly, several retailers in the luxury segment, including Nordstrom (+6.5%) and Saks (+0.7%) helped offset weakness from Dillard’s (-8.0%) and Neiman Marcus (-6.0%), among others. In a press release, management for Saks reported strength came from women’s designer sportswear and “gold range” apparel, outerwear, jewelry and accessories, with Saks Direct and Saks OFF 5th also performing well during the month. JC Penny (-4.5%) and Kohl’s (+1.4%) missed analysts expectations, but JCP upped its fourth quarter guidance.
On the teen side, the usual suspects continued to struggle, with Abercrombie & Fitch (-15.0%) and American Eagle (-5.0%) bringing up the rear despite cooler weather that drove apparel for some other retailers. Abercrombie, which received no help from its struggling Hollister Co. brand (-21.0%) managed to miss analysts’ conservative expectations, while Aeropastale (+3.0%) and American Eagle also missed expectations.
Gap Inc, boosted by its Banana Republic North America and Old Navy North America segments, exceed analysts’ expectations by posting comp growth of 4%. CFO Sabrina Simmons also offered updated guidance for the retailer, saying the company expects Q3 earnings per share to be about 20% up from last year. The only other teen retailer to post growth was The Buckle, which missed expectations but still continued to buck trends in a tough retail environment by posting growth of 4.3%.
As noted, discounters set the bar for the month as cash-strapped consumers continue to scour the racks for deeply-discounted designer labels. Leading the way was Ross Stores (+9.0%) and The TJX Cos. (+10.0%) which includes TJ Maxx, Marshalls and Home Goods. Ross president and CEO Michael Balmuth said growth stemmed from strength from shoes, dresses and home, while the Southwest, Southeast and California were the strongest regions. Subsequently, Balmuth upped Q3 guidance from a range of 75 cents to 77 cents to a range of 83 cents to 84 cents per diluted share.
Sales at wholesale clubs increased 4.3% including fuel, with the strengthening of foreign currencies compared to the U.S. dollar boosting Costco to a 5% gain and waning gasoline sales dropping BJ’s Wholesale to a 1.1% decline from October 2008.
Looking ahead, the ICSC said it expects November same-store sales to be 5% to 8% above November 2008, which it called “the nadir of a retail spending cycle” where sales plummeted 7.7% amidst limited spending money and heavy discounting at retail. However, the ICSC warned that “…this easy year-ago comparison — and the resulting degree of sales strength — adds to the uncertainty for November and the holiday season as a whole” and stated that retailers would remain cautious “ even as the season is clouded by (and likely inflated by) the year-ago sales weakness.”
The Buckle reported October comps increased 4.3% on net sales that increased 10.5% to $66.6 million from $60.3 million for the four-week fiscal month. On a pre-recorded call, management for the mall-based retailer said Men’s sales, which represented 38.5% of total sales, were “up slightly” on strength from denim, sweaters, outerwear and footwear. Price points were up approximately 6%.