(Updates with holiday context, more details.)
By Anna Prior
Retailers reported better-than-feared sales in October as steep
discounts and promotions helped drive traffic, a trend that's
likely to continue through the critical holiday season.
Expectations for October were muted due to worries about the
partial U.S. government shutdown at the beginning of the month and
the downbeat sales trends reported during the back-to-school
season.
"People were watching a dissolving quarter in September and were
nervous about whether it would continue into October," said Rebecca
Duval, a retail and apparel analyst at BlueFin Research Partners.
"The promotional levels were very high and that kind of worked in
terms of driving traffic."
While Thursday's data from the few retailers still reporting
monthly results is "somewhat encouraging," Ken Perkins of Retail
Metrics cautioned against reading too much into the numbers, noting
October is typically a transitional month and the lackluster
back-to-school season has a higher correlation with how holiday
sales usually fare.
"Steep discounting is likely to be the order of the day from now
until the New Year and could drive better-than-expected sales," he
said.
Consumers' penchant for spending on big-ticket items continued
in October with auto makers earlier this month reporting stronger
sales--suggesting the industry wasn't too dented by the federal
government shutdown and debt-ceiling debate in Congress--but
expectations were low for apparel retailers in particular as
same-store sales missed estimates in the previous three months.
In addition, teen retailer Abercrombie & Fitch Co. (ANF)
scared investors earlier this week as it reported a 14% plunge in
fiscal third-quarter same-store sales and set expectations for a
low double-digit drop for the fourth quarter.
But some retailers, like Buckle Inc. (BKE) and L Brands Inc.
(LTD), bucked that trend by posting growth on Thursday, with only
youth-focused action sports apparel retailer Zumiez Inc. (ZUMZ)
reporting sales that missed analysts' expectations.
Even J.C. Penney Co. (JCP), which long ago stopped reporting
monthly metrics, sought to calm its investor base in reporting
same-store sales edged up 0.9% last month, its first monthly
increase since December 2011.
The eight retailers tracked by Thomson Reuters that have
reported sales so far posted a 3% increase in October same-store
sales, or sales at stores open at least a year, while Gap Inc.
(GPS) is slated to report after the market closes. Thomson Reuters
has projected the nine companies to post 2% growth, versus a 5.7%
increase a year earlier.
Many retailers, including the major department stores, have
stopped reporting monthly results, making it more difficult to
gauge the performance of the entire industry.
L Brands--formerly Limited Brands--reported same-store sales
jumped 8%, well above analysts' estimate of 2.2% growth, boosted by
a 10% rise at Victoria's Secret. L Brands also noted it expects
quarterly earnings to come in at the high end of its previous
guidance.
Of L Brands' other units, Bath & Body Works sales grew 4%,
topping the expected 1.8% increase, while La Senza sales fell 2%,
compared with expectations for 2.5% growth.
Costco Wholesale Corp. (COST) posted a 5% increase, excluding
gasoline, topping expectations for 4.5% growth. Among the stronger
performing categories were garden, toys, office, small appliances,
jewelry and apparel, though the company noted the consumer
electronics category was muted.
Regional discounter Fred's Inc.'s (FRED) same-store sales grew
0.8%, slightly above expectations for 0.7% growth. But Chief
Executive Bruce Efird said sales were at the lower end of the
company's guidance, pointing to poor weather around Halloween and
consumers tightening spending during the recent budget crisis.
Mr. Efird also noted Fred's expects a "very tough retail
environment" for the upcoming holiday season, so Fred's has
maintained inventories at or below last year's levels.
Among teen retailers, Buckle reported a 2.6% increase in
same-store sales, beating expectations for a 1.7% decline.
Zumiez, meanwhile, reported a 1.2% increase, slightly below
expectations for 1.7% growth. The retailer posted growth in the
accessories, footwear, hard goods, and juniors categories, while
the company's men's and boy's segments recorded lower sales.
Write to Anna Prior at anna.prior@wsj.com
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