2nd UPDATE: Mixed October Retail Sales Set Stage For Holidays
05 November 2010 - 2:02AM
Dow Jones News
Retailers in October set the stage for a fiercely competitive
Christmas, with price wars, promotions and competitive positioning
spurring most of the sales gains and suggesting that shoppers will
be aggressively wooed during the holiday season.
"There is a market-share war that is heating up as we move into
the holiday season and some retailers evidently are already pulling
out the big guns, creating winners and losers," said John Long,
retail strategist at Kurt Salmon Associates.
Macy's Inc. (M) was one of the early winners, posting a 2.5%
increase in October same-store sales when a 1.6% gain was
projected. The department store raised its earnings and same-store
sales growth estimate for the second half of the year. "While we
experienced some softness in sales early in October given the
unseasonably warm weather, we ended the month with a strong trend
going into the holiday selling season," Chief Executive Terry
Lundgren said.
Macy's may be taking market share from two of its chief rivals.
J.C. Penney Co. (JCP) reported a 1.9% drop in comparable-store
sales and Kohl's Corp. (KSS) posted a 2.5% decline, when both
department stores were expected to report gains.
"Strong performance in the second half of the month partially
offset lower sales in the first two weeks of the month due to
unseasonable weather," Kohl CEO Kevin Mansell said.
Target Corp. (TGT) posted a same-store sales increase of 1.7%,
at the low end of the company's expectations but above the 1.5%
increase expected by analysts. The mass merchant in October began
to give customers 5% off when they use its Visa or debit cards and
has also aggressively been remodeling stores, with an emphasis on
adding groceries as a way of bringing shoppers in. Target, however,
said the environment remains uncertain.
The 28 retailers that report same-store sales, or sales at
stores open at least a year, posted 1.6% growth, equal to
expectations of analysts polled by Thomson Reuters, although the
sales performance on a store-by-store basis was uneven. Retailers
posted 1.8% growth a year ago and, as a group, are now in their
second month of comparing against positive numbers after a year of
same-store sales declines. Wal-Mart Stores Inc. (WMT) does not
report same-store sales.
Luxury fared well in October with Saks Inc. (SKS) posting an
8.1% jump in same-store sales for the month, sailing past the 2%
increase analysts had expected. The company said the strongest
sellers at its Saks Fifth Avenue stores were women's shoes, women's
apparel, men's sportswear, cosmetics, and fragrances. Saks said it
continues to expect "comparable store sales growth in the
mid-single digit range" in the second half of the year.
Nordstrom Inc. (JWN) also beat expectations, posting a 3.4%
increase in same-store sales, compared with the 2.7% increase
analysts were expecting.
Other winners include Limited Brands Inc. (LTD), which sharply
boosted its fiscal third-quarter profit target after reporting
October same-store sales jumped a bigger-than-expected 9%, as the
parent of Victoria's Secret and Bath & Body Works continues its
resurgence of late.
Aeropostale Inc. (ARO) appears to be a victim of the pricing
wars among teen retailers, posting a 2% drop in October same-store
sales when analysts expected a 3.1% increase. The company is being
pinched as other chains that sell teen apparel, such as Abercrombie
& Fitch Co. (ANF) and American Eagle Outfitters Inc. (AEO) have
been to lower prices, encroaching on Aeropostale's corner of the
market.
Also in the teen sector, Zumiez Inc. (ZUMZ), which has been on a
tear, posted a 22% jump in comparable-store sales when a 7.8%
increase was expected. Zumiez lifted its third-quarter earnings
projection, citing better-than-expected demand and margins. Hot
Topic Inc. (HOTT), however, posted an 8.5% same-store-sales drop
when a 3.2% decline was projected, and said it expects earnings for
the quarter ended Saturday to be at the low end of the target it
gave in August.
The results are giving a taste of the measures retailers are
going to in order to book sales as they come into their most
important sales period of the year.
But the sales gains by some at the expense of others raises
margin issues for those that are seeing stronger sales. "This type
of behavior can be destructive," said Ed Yruma, retail analyst at
KeyBanc Capital Markets. "It seems that some of the companies are
buying the comp."
Gap Inc. (GPS), for instance, reported a 2% increase in
same-store sales when a 2.5% drop was expected, and said its
merchandise margins for the third quarter are expected to be below
those of last year.
But retailers are up against consumers who are still not
comfortable with the economy. Projections for holiday season sales
vary, ranging from a slight loss to over 4% growth, reflecting even
economists' uncertainty about the season.
Unemployment remains close to 10% and consumer confidence is
still very shy of robust, factors that will play into buying
decisions.
The situation has caused some retailers to already begin
promoting Christmas. Sears Holdings Corp. (SHLD) in October started
to advertise "Black Friday" specials. Toys "R" Us Inc. is promoting
its catalogue of holiday toys and gadgets. In a sign of the kind of
approach many retailers may take this holiday season, the Toys "R"
Us catalogue has an application for smartphones and is
Internet-friendly.
-By Karen Talley, Dow Jones Newswires; 212-416-2196;
karen.talley@dowjones.com
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