NEW YORK (CNN/Money) -
U.S. retailers blamed unseasonably warm weather for slow apparel sales last month as chain stores overall struggled to keep pace with September's big sales gains.
Discounter Wal-Mart Thursday delivered results in line with expectations, while Target said its sales were below par due to poor performances at its Mervyn's and Marshall Field's department stores.
But apparel was the hardest-hit sector in October.
"These numbers are not good," said Ken Perkins, retail analyst with Thomson Financial. "As one analyst put it, October will be the nightmare before Christmas."
Perkins added, "After a stellar September for retailers, it was a given to expect some weakness last month. But this is pretty amazing. I don't think I've seen this much red on the board."
Among the discounters, Wal-Mart Stores Inc (WMT: Research, Estimates)., the world's largest retailer, said same-store sales -- or sales at stores open at least a year -- grew 4.5 percent, at the upper end of its earlier guidance of a 3 to 5 percent gain for the month.
Its net sales in the four-week period ended Oct. 31 were $19 billion, up 11.8 percent over the same period a year earlier. Office supplies, electronics, toys, pet supplies, lawn and garden, and food were some of the strongest performing categories.
In its pre-recorded sales call, Wal-Mart said unseasonable weather in September offset sales of cool weather items last month Separately, Halloween sales were better this year than last, although the last week of the period was the slowest and was negatively impacted by a weak Friday due to Halloween.
"As expected, Halloween traffic was reduced from sales trends after 6:00 P.M. due to parties and trick-or-treating," Wal-Mart said.
The retailer expects November sales to grow in the 3 to 5 percent range, saying it expects the early autumn shopping to cut into sales this month.
Target Corp.'s (TGT: Research, Estimates) sales grew 1.6 percent, missing analysts' forecast for a 2.8 percent gain.
"The worst part of these results is that they show that the effect of the tax rebate checks has petered out. This is a nightmare in itself for retailers and it doesn't bode well for Christmas," said Kurt Barnard, an independent retail consultant. "Also, we'll probably see more markdowns now, more than retailers anticipated for the holidays. That will hurt their bottom line."
Department stores also posted soft sales last month. Federated Department Stores (FD: Research, Estimates), the parent of Macy's and Bloomingdale's, logged a monthly sales decline of 2 percent, compared with a 3.2 percent gain in September, while comparable sales for its third quarter inched up 0.3 percent.
Sears Roebuck & Co.'s (S: up $0.16 to $52.65, Research, Estimates) same-store sales fell 2.7 percent, far below analysts' forecasts of a 1.6 percent gain. The company also blamed warmer weather for the shortfall. The Hoffman Estates, Ill.-based retailer in August had reversed 23-consecutive monthly sales decline.
But Kohl's (KSS: Research, Estimates) was the worst performer among the department stores, posting an 11.6 percent decline, far worse than the 6.5 percent decline forecast by analysts.
"Kohl's is having a major disconnect with its customers," said Bill Dreher, analyst with Deutsche Bank Securities. "The company's inventory growth is outpacing sales and I think their problems will continue into the fourth quarter and even the first quarter next year."
Dreher has a "sell" rating on Kohl's.
Meanwhile, Perkins said he was particularly taken aback by wide misses from clothing chains Talbots, Limited and Aeropostale.
Women's apparel chain Talbots (YLB: Research, Estimates) logged an 8.4 percent same-store sales decline in October versus expectations for a 1.4 percent gain and warned of continued weakness in the fourth quarter .The company also trimmed its third-quarter earnings forecast to between 58 and 60 cents a share from its previous outlook of 62 to 65 cents.
Limited Brands (LTD: Research, Estimates), which operates the Victoria's Secret, Express, Limited and Bath & Body Works chains, cited lower inventory in its apparel business for a 2 percent sales decline last month, compared with analysts' forecast of a 1.9 percent gain, while teen apparel retailer Aeropostale's (ARO: Research, Estimates) sales fell 6.8 percent versus forecasts for a 1.4 percent increase.
"Is this just a blip on the radar? I think it could be," said Perkins. "The economy seems to be snapping back. The third-quarter GDP number was a blowout number. I don't think it will be that great in the fourth quarter, but consumer spending will hold through the holidays. Also, retailers will be benefiting from easier comparisons in November and December."
But Dreher, disagrees.
"We believe our competitors have shown irrational exuberance with Christmas forecasts," said Dreher. "We believe the average consumer is worried about higher gasoline prices, jobs and doesn't believe he will benefit from the stock market. With this climate, if you're just a 'me-too' retailer, you'll be in a world of hurt. The department stores will suffer but the discounters Wal-Mart and Target will do well."
-- analysts quoted in the story do not own shares and their firms do not have an investment banking relationship with the companies that they cover.
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