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. 

The firm, which provides retail sales estimated based on weather trends, said the month was the snowiest in at least 20 years, with snowfall up 126% from last year’s level.  Needless to say, retailers got a very nice lift from sales of outerwear and boots as consumers opened their wallets to exemplify their but now-wear now attitude.

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.


Still, the International Council of Shopping Centers, which tracks results from 32 retail-chain stores, said the favorable weather, an improving economy and stock market and easy 2008 comparisons drove consolidated same-store sales past expectations for the month. Moreover, further cementing the idea that the recession is lifting was the fact that all October sales for all major segment outperformed their fiscal year-to-date results, as well, according the ICSC.

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.


At TJX, president and CEO Carol Meyrowitz noted strength from the company’s Marmaxx Group (T.J Maxx and Marshalls), which surged 12% on a same-store basis. “…customer traffic continued to drive sales throughout the month, boding well for the holiday season,” Meyrowitz said. Meyrowitz confirmed that the company expected third quarter diluted EPS to be “at or slightly above” the originally forecasted range of 77 cents to 79 cents.

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.”


In related news, a report issued by the Labor Department late last week indicates that the nation’s unemployment rate has risen above 10% for the first time since 1983, which doesn’t bode well for retailers hoping to cash in on an influx of discretionary income for Holiday 2009. Prior to the report, economists had forecasted the unemployment rate to increase 9.9%. Reports indicate that the spike in the unemployment rate was driven by a drop in the number of people who describe themselves as unemployed as well as declining jobs among the teenaged population.

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%.


Zumiez Inc. reported comps for the four-week period ended Oct. 31 decreased 8.9% on net sales that slipped 1.5% to $24.7 million from $25 million a year ago. Weekly comps were negative 8.9%, negative 5.5%, negative 13%, and negative 8.1% for weeks one through four, respectively. On a pre-recorded call, CFO Trevor Lang said declining comps were a result of a decrease in same-store transactions.