October Comp Sales Up, But Still Disappointing

In Reports, What's New, Industry News by Accessories Staff

New York—Major retailers reported today their October comparable store sales were up 3.4% in total from last year, but below retail analysts’ expectations for a 4.5% increase.

The results were disappointing, too, given that they come as retailers prepare for their most important selling season, holiday. Of the 23 major retailers reporting today, about two-thirds reported sales below forecasts.

“Some sectors cooled a little bit in October,” said Michael McNamara, vice president of research and analysis at data service MasterCard Advisors SpendingPulse. Sales were hampered by unseasonably warm weather early in the month in many regions and then heavy snowstorms in the Northeast at the end of the month.

Major retailers, such as Macy’s Inc., Saks Inc, JCPenney and Target posted lower than expected comparable store sales. Wet Seal Inc. posted a 9.7% decline, Bon Ton a 10.2% decline and Gap Inc., parent to Gap, Banana Republic and Old Navy, saw sales drop 6%.

Among those beating forecasts were Kohl’s, which reported a 3.9% gain, Nordstrom Inc., Ross Stores, and Zumiez.

Consumers Regrouping, Retrenching for Holiday?

Retail analysts said they weren’t surprised with the mixed message in October, a month that have seen major swings into both positive and negative territories. While the stock market rebounded by the end of the month upon news of a possible solution to the Eurozone debit crisis, consumer confidence remained low compared with historic levels.

And while the ADP National Employment report issued Wednesday said private employers added more jobs than expected, unemployment is still high overall

“This uncertainty, the news changing every day, it causes a freeze,” said Wharton School professor Barbara Kahn. “Consumers are regrouping and retrenching and saving their pennies for the holiday season,” added Ken Perkins, president of Retail Metrics, a research firm.

Some analysts criticized Wall Street expectations which may not be taking into account the worry in many consumers’ minds.

“This is expectations getting ahead of reality,” said AlixPartners managing director Joel Bines. “It’s still a solid performance.”

Among the store’s reporting October sales and, in some cases, third quarter results were:

●Macy’s Inc. posted a 2.2% comparable store sales, marking the department store retailer’s 23rd consecutive month of increases. Nonetheless, the increase missed analysts’ average estimate for 3.6% growth.

Total October sales rose 2% to $1.84 billion compared to $1.8 billion a year ago.

“Our third quarter was within our initial guidance for same-store sales to be up between 4% and 4.5%,” said Terry Lundgren, ceo. “And as previously expected, October showed the smallest year-over-year growth rate of the quarter as we shifted Macy’s popular Shop For A Cause event from October last year into August this year.”

For the third quarter, total sales increased 4.1% to $5.85 billion compared with $5.62 billion last year. Comparable store sales grew 4%.

The company’s online business continues to gain ground. In October, online sales were up 39.2%. Online sales were up 39.8% for the quarter and 39.4% year-to-date.

●JCPenney reported that its comparable store sales decreased 2.6% in October. Total sales declined 6.6% to $1.19 billion from $1.27 billion a year ago.

While sales overall were soft, women’s apparel and accessories experienced sales gains in October and the southeast was the top performing region, the company said.

●Kohl’s said its October comparable store sales rose 3.9% thanks to demand for its new Jennifer Lopez and Mark Anthony brands. The comp sales increase beat analysts’ average estimate that expected a 3.7% increase. Total sales increased 5.6% to $1.33 billion.

Kevin Mansell, Kohl’s chairman/president/ceo, reported that consumers responded favorably to the Lopez and Anthony brands as well as new marketing programs. Kohl’s plans to continue spending on marketing, especially digital and broadcast, as it enters the fourth quarter.

For its August to October quarter, comparable store sales rose 2%, while total revenue rose 3.7% to $4.38 billion.

●Dillard’s reported that its October merchandise sales rose to $377.97 million from $356.1 million in the prior year. Total sales increased 6% and comparable store sales were up 8%.

Sales for the 13 weeks ended October 29 were $1.36 billion vs. $1.32 billion last year. Total sales increased 4%. Comparable store sales rose 5% for the 13 weeks ended October 29

Home and furniture sales were said to be “significantly below trend” in the October results. The retailer said October sales were a little below trend in its Eastern region, below trend in the West and consistent with average sales in the central part of the country.

●The Bon-Ton reported that its October comparable store sales declined 10.2%. Total sales were off 10.4% to $192. Analysts’ average estimate forecast only a 0.5% decline.

“We attribute the weak performance to changes we made in our advertising calendar, which did not drive the results we expected, continued lackluster customer response to traditional merchandise offerings in ladies’ ready-to-wear and consumer resistance to increased pricing on certain products,” said Tony Buccina, vice chairman/president of merchandising.” On the positive side, strategic initiatives introduced in September, such as pilot stores, expanded shoe departments and assortments, and increased offerings of updated ladies’ merchandise have all yielded results above the company’s performance.”

Although Bon Ton is planning aggressive promotions for holiday, the company revised downward its full year forecast “based on lower than expected sales in the third quarter and a more conservative outlook for the fourth quarter.” It now expects full year earnings to range between a loss of 65 cents a share to earnings of 25 cents a share, down from its May outlook for earnings of $1 to $1.25.

●Stage Stores Inc. posted an October comparable store sales increase of 0.8%. Total sales increased 1.9% to $102 million from $100 million in October 2010.

For its third quarter, the company reported total sales increased 0.5% to $333 million from $332 million last year. Comparable store sales decreased 0.6%.

The company now also forecast that the loss share for the third quarter will be wider than the low end of the prior range of loss 21 to 24 cents a share. Analysts’ average forecast expects a loss of 29 cents a share for the quarter.

●Neiman Marcus Inc. reported today that its first quarter sales climbed 8.2% to $1 billion from $927 million in the same period a year ago. Total comparable store sales increased 8%.

By division, its specialty retail stores, which include Neiman Marcus, Last Call and Bergdorf Goodman, comparable store sales increased 6.4%. At its direct division, which includes online and catalog, comparable sales increased 15.2%.

Strongest categories included women’s contemporary sportswear and footwear, designer handbags, accessories, precious jewelry and men’s. By regions, the West, Southeast and Texas were strongest. The top selling merchandise categories in its direct segment included women’s apparel and shoes, handbags, jewelry and beauty.

●Nordstrom, Inc. reported a 5.4% increase in its October comparable store sales. Preliminary total sales rose 13.3% to $749 million from $662 million in October 2010.

For its third quarter, comparable store sales rose 7.9% compared to the same period 2010. Preliminary total sales increased 14.2% to $2.38 billion. Year-to-date comparable store sales rose 7.2% from last year.

●Saks Inc. reported its October comparable store sales increased 1.8%. Total sales increased 0.8% to $235.7 compared to $233.9 million in October 2010.

Saks Fifth Avenue’s strongest performers included women’s contemporary sportswear and “wear now” apparel, men’s clothing and contemporary apparel, men’s shoes, and handbags. Saks Direct performed well during the month.

Since the company excluded cosmetics and fragrances from its four-day “Friends & Family” discount event, management estimates that October comparable store sales would have increased by mid-single digits if cosmetics and fragrances had been included in the event.

For the third quarter ended October 29, total sales grew 4.5% to $678.6 million compared to $649.6 million for the prior year third quarter. Comparable store sales increased 5.8% fin the third quarter.

●Target said its October comparable store sales increased 3.3%, but still below analysts’ estimates for 4.2% yet an improvement from the 1.7% increase a year ago. Total sales rose 4.3% to $4.84 million.

Gregg Steinhafel, ceo, said Target is “more relevant than ever in these challenging economic times.”

The company said an increase in the average size of each transaction offset a slight decline in the number of transactions, meaning consumers shopped Target less often but spent more when they did. Strong performers included essentials, with food and household products performing the best. Softer sales for discretionary items such as jewelry and home décor.

●Gap Inc. reported its comparable sales for October declined 6% compared with a 4% increase in October 2010. Net sales were $1.14 billion, down from $1.19 billion last year.

By division, Gap North America posted a 5% decline in comparable store sales vs. a 7% increase last October. Banana Republic North America had 1% increase in its comparable stores sales vs. flat last year. Old Navy North America’s comparable store sales declined 9% vs. a 4% increase last year. Gap Inc.’s International division had a 7% decline in comparable store sales vs. a 2% increase last year.

For its third quarter, net sales declined 2% to $3.59 billion from $3.65 billion in the year-ago quarter last year. Total comparable store sales, which included online sales, were down 5% compared with a 1% increase in the third quarter 2010.

Comparable stores sales by division in the third quarter were: a 6% decrease at Gap North America, a 1% decrease at Banana Republic North America, a 4% decrease at Old Navy North America.

Gap Inc. said it now expects earnings per share for the third quarter to be in the range of 35 cents to 37 cents, above analysts’’ average estimate expecting 32 cents a share.

●Limited Brands said its total October comparable store sales rose 6% almost even with analysts’ estimates of 6.2 %. Total sales rose 5.7% to $652.4 million.

Victoria’s Secret stores led the comparable store sales growth with a 9%, Bath & Body Works increased 6%, and La Senza fell 5%.

For its August to October quarter, the company said it now expects to earn 22 to 24 cents a share, an increase from its previously forecast for 17 to 22 cents. Analysts’ average estimate expects 23 cents a share. Its third quarter total sales rose nearly 10% to $2.17 billion. Comparable store sales rose 9%.

In other news, Sycamore Partners, a New York-based private equity firm, purchased a 51% controlling interest in Mast Global Fashions, Limited Brands In.’s third-party apparel sourcing division.

Limited’s sourcing division for its Victoria’s Secret and Bath & Body Works businesses is separate from Mast, and the company will retain ownership over that division.

●American Eagle Outfitters posted strong third-quarter sales, helped by improved merchandise, more targeted promotions and higher online demand.

Although American Eagle no longer releases monthly sales reports, the teen-oriented retailer said Wednesday its  total sales rose 11% to $832 million. Comparable store sales were up 5% in the quarter. AEO direct, its online business that ships to some 76 countries worldwide, posted a 21% increase for the quarter compared with a 2% decrease for the same quarter last year.

“Sales momentum continued beyond fall, and we have seen a positive customer response to the initial holiday assortment,” Jim O’Donnell, ceo, said. “Our third quarter results reflect stronger merchandise assortments and targeted promotions supported by strategic inventory investments. We delivered double-digit sales growth and improved comp performance, despite a continuing difficult economic environment. Perhaps equally gratifying, sales momentum continued beyond fall, and we have seen a positive customer response to the initial holiday assortment.”

For the third quarter, the company narrowed its profit range to 26 to 27 cents a share, compared with its previous forecast of 22 to 27 cents.

●Cato Corp.’s October comparable store sales dropped 3%. Total revenue fell 2% to $62.7 million.

Its third quarter comparable store sales declined 3%, while total revenue was down 2% to $194.1 million. Cato reported that its quarterly earnings will come in between its prior forecast of 18 cents to 21 cents a share. Analysts’ average estimate expects 18 cents.

●Wet Seal Inc. said its October same store sales dropped 9.7%, worse than the 1% decline analysts’ average estimate forecast. The company reported comparable store sales declines at both its Arden B and Wet Seal stores.

Total revenue slipped 5% to $40.5 million. Online sales dropped 24% in October as the company moves its model to sell more merchandise online at full price and better align that merchandise to its in-store sales.

Wet Seal’s third quarter comparable store sales dipped 0.9% burdened by a 6.3% at Arden B. Wet Seal posted a 0.1% decline. Total revenue rose 3.9% to $152.1 million in the quarter, while online revenue fell 23%.

Wet Seal now anticipates third quarter earnings of 4 cents per share, down from a previous forecast for earnings of 5 to 6 cents per share. Analysts’ average estimate expect 5 cents.

●Hot Topic said its same store sales fell 1.6% in its third quarter, while net sales for declined 4.1% to $175.7 million, hurt by weak sales at its namesake and Torrid stores.

Lisa Harper, Hot Topic’s ceo, said, “Although we are pleased with our progress in the key areas of fashion apparel and licensing at Hot Topic, we are quite disappointed with the October sales related to Halloween in that business. Based upon our more conservative view of the upcoming fourth quarter, we are adjusting our expectations accordingly. Despite the sales miss in October, our inventories are on plan as we enter the fourth quarter.”

The company, which no longer reports monthly sales,  also said it now expects third quarter earnings will likely be at the low end of its previously-issued guidance of 7 to 9 cents a share. Analysts’ average estimate expects 8 cents a share.

●Buckle Inc. said its comparable store net sales for October increased 8.7% compared with last year. Net sales for October rose 12.1% to $79.7 million.

Comparable store net sales for the 13-week third quarter ended October 29 grew 9.1% from last year, while 13-week net sales improved 12.4% to $273.4 million.

●Zumiez posted a better-than-expected increase October comparable store sales The specialty skate board and accessories store had a 3.3% increase beating analysts’ average estimate projecting a 2.8% increase an don top of a 21.5% increase in October 2010.

●Ross Stores Inc. said its October comparable store sales grew 5%, ahead of the 3% increase projected by analysts’ estimate. The company had forecast growth of 1% to 2%.

Total sales increased 10% to $661 million. Ross said juniors and footwear were the strongest merchandise categories in the month, while Florida remained its best-performing market.

“We are pleased that October same store sales were ahead of our expectations for a 1% to 2% increase,” said Michael Balmuth, vice chairman/ceo. “Our performance for both the month and the quarter benefited from our ongoing ability to deliver terrific name brand bargains for the family and the home to today’s increasingly value-focused consumers.”

Referring to its strong October performance, Ross predicted a profit of $1.25 to $1.26 a share for the quarter ended Oct. 29. Last month, Ross raised its earnings view to $1.16 to $1.18 as sales and margins also o exceeded expectations during August and September.

●Stein Mart’s October comparable store sales increased 0.1% and its total sales rose 0.2% to $85.7 million. That was better than the 6.5% decline in the same period a year ago.

The company warned that an August sales decline had forced it to offer clearance sales, cutting into profit margins for the quarter. For October, sales were best in Arizona and Florida, but weaker in the Midwest, Northeast and the Carolinas. Linens, men’s furnishings and accessories had particularly strong sales for October while boutique, career sportswear and gifts were weaker.

●TJX Cos., which operates T.J. Maxx, Marshalls, and HomeGoods, reported that its October comparable store sales rose 3% from a year ago.

The comp store sales increase came despite unseasonably warm weather in some parts North American that hurt the sales of cold-weather apparel.

“As previously stated, we expect third quarter earnings per share to be solidly in the middle of our range of $1.03 to $1.07, representing year-over-year growth of between 12% and 16%, TJX chief executive Carol Meyrowitz said. “We believe the momentum in our business across our chains bodes well for the holiday selling season and the fourth quarter.”

●Costco Wholesale Corp.’s October comparable store sales rose 9% aided by high gasoline prices but marginally below analysts’ average estimate for a 9.2% increase.

Excluding inflation in gas prices and stronger foreign currencies, comparable store sales rose 7%. Total net sales net surged 11% to $7.01 billion.


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