Same-store sales edge up
October retail sales gain 2.3%, with specialty stores taking the lead
NEW YORK (CNNfn) - Same-store retail sales rose 2.3 percent last month, in line with economic growth, as declines in some department stores offset strong gains on the specialty apparel level, a new report showed Thursday.
TeleCheck Services Inc., the world's largest check acceptance company, said the monthly figures set the stage for moderate growth in holiday retail sales this year.
"Consumer retail spending continued at a modest pace, consistent with the slower growth of the economy," the report said.
Based on current economic conditions, TeleCheck expects retailers to see a 3 percent to 5 percent gain in same-store holiday sales, said Dr. William Ford, the company's senior economic advisor.
The TeleCheck Retail Index is based on a same-store comparison of the dollar volume of checks written by consumers at more than 27,000 of TeleCheck's subscribing locations.
The good, the bad and the stingy
As is often the case, consumers last month did not distribute their dollars with an even hand. Stores with an emphasis on lower-priced merchandise, for the most part, continued to perform well.
Wal-Mart Stores, the nation's largest retailer, reported a 7.7 percent rise in same-store sales last month, while number three retailer, Kmart Corp. (KM), said its same-store sales grew a more modest 4 percent.
"Kmart's sales for October were on plan despite softer apparel sales due to unseasonably warm weather during the latter half of the month," Floyd Hall, chairman, president and chief executive, said. "Sales volumes for the third quarter were near expectations. Categories showing particular strength for the month included home appliances and electronics, do-it-yourself, home decor, cosmetics and fragrances, consumables, stationery and pharmaceuticals."
At the same time, J.C. Penney (JCP) sales for stores open at least one year dipped 2.8 percent for the month, luxury retailer Saks Holding Co. fell 1 percent and Dayton Hudson(DH), the fifth-largest U.S. retailer and owner of Target discount stores, saw its sales rose 2.3 percent.
Federated Department Stores (FD), owner of Macy's, Bloomingdales and Burdines, also recorded a 1.9 percent drop in October comparable-store sales.
Company Chairman and Chief Executive James M. Zimmerman attributed the drop to a combination of factors, including warmer fall weather and a weak apparel sales trend that began in September.
"Although we continue to be somewhat puzzled by the unanticipated weakness in sales we are experiencing this fall, we believe that unseasonably warm temperatures in much of the country, along with a slowdown in the economy and a decline in consumer confidence levels certainly are factors," Zimmerman said. "While September and October sales will affect our ability to achieve our annual sales target, it remains to be seen whether these circumstances will carry over into the fourth quarter."
May Department Stores (MAY) reported a 2.8 percent increase.
Edward Jones analyst Asma Usmani said she believes that the holiday sales season could get a significant lift from the Federal Reserve, which may decide to lower interest rates further at its next meeting Nov. 17.
"If interest rates come down further, that'll be another boost for the retailers," she said. "I'm very confident about the holiday season. I think it'll be as good as, if not better than, last year."
Usmani added investors would be wise to hedge their bets on discount retailers going forward.
"I think investors really should focus on the discount retail sector given the strong performance we've been seeing and I think this momentum is going to continue into the fourth quarter," she said, identifying Dollar General (DG) as one of her favorite picks.
Specialty retailer Talbots Inc., (TLB) posted a staggering 26.3 percent surge in comparable- store sales last month, helped by better-than-expected demand for regularly priced merchandise and a mid-season sale.
In September, Talbots reported nearly a 15 percent drop after bumping its annual mid-season sale a week later into October. That shift helped inflate October sales and held September sales down.
For the combined two-month period, same-store sales rose 3.5 percent.
"As a result of the strong sell-through of our fall merchandise both at regular price and markdown, we are now looking for better-than-expected earnings in the third quarter," said Arnold B. Zetcher, company president and chief executive.
High-end women's apparel retailer AnnTaylor (ANN) also reported a 15.5 percent gain in October same-store sales, as customers apparently gave in to fashion and the higher prices that go along with it.