NEW YORK – The outlook for the holiday season brightened Thursday as many of the nation’s retailers reported an improvement in sales in October. Discounters, however, had another month of lackluster results as their customers cut back on spending again.
Many mall-based apparel stores, including Limited Brands, Abercrombie &Fitch Inc. and Gap Inc., saw a rebound in spending, helped by cooler weather. Wal-Mart Stores Inc., Big Lots Inc. and ShopKo Stores Inc. were among the merchants who extended a sluggish streak that began in June.
“There was definitely more broad-based growth across the apparel group. But the low-end consumer continues to be hurt on two fronts – jobs and wage growth, and higher energy prices,” said Ken Perkins, an analyst at RetailMetrics LLC, a research firm in Cambridge, Mass.
“This is a little more encouraging as we head into the holiday season, though it is not a harbinger for a stellar shopping season.”
John Morris, senior retail analyst at Harris Nesbitt, noted that “there was pent-up demand for apparel coming at a time when weather was more seasonable,” but he warned that the question remains whether that buying can be sustained during the holiday season.
“The average consumer seems to be pinched,” he said.
Even in more secure economic times, it’s hard to tell from October sales how the holiday season will fare – whether consumers will shop enthusiastically from the start or put off buying until late December when retailers to slash their prices. With the current uncertainty about jobs and energy bills, many store owners are uneasy about the holidays, especially after the Conference Board reported last week that consumer confidence fell to a seven-month low in October, marking its third consecutive monthly decline.
It’s clear shoppers will be looking for value. One of the retailers that did well in October was Target Corp., considered an upscale discounter. Target reported a 6 percent gain in sales from stores open at least a year, known as same-store sales. Analysts surveyed by Thomson First Call had expected a 5.6 percent gain.
The International Council of Shopping Centers-UBS same-store sales tally of 75 retailers rose 4.1 percent in October, better than the 3 percent to 4 percent gain forecast. That was the best performance since May, when retailers recorded a 5.7 percent gain, according to Michael Niemira, chief economist at the International Council of Shopping Centers. In September, the tally rose 2.4 percent. Same-store sales are considered the best indicator of a retailer’s performance.
Niemira predicted same-store sales increases of 3 percent to 4 percent for the holiday period. That compares with a 4 percent increase in 2003.
The National Retail Federation projects total retail sales, which exclude restaurant and auto sales, will increase 4.5 percent for the November-December period, below the 5.1 percent gain of a year ago.
The good news is that stores seem to be in good shape when it comes to inventories – estimated to be up 5 percent compared to a year ago. That should enable retailers to have more merchandise sales rather than gift card sales, Niemira said. While retailers get instant cash from gift cards, they don’t record the sales until the cards are redeemed – usually in January or later, draining sales away from holiday tallies.
Richard Hastings, a retail analyst at the Bernard Sands credit advisory firm, said he is encouraged that stores are getting smarter about discounting, and not just slashing prices across the board. So he’s optimistic that they won’t need heavy markdowns this holiday season.
But retailers are worried because there’s no must-have items that will bring throngs of customers to the stores, although plenty of electronics items such as flat-screen TVs and miniature iPods are expected to do well.
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