By and  on October 8, 2009

Less bad was more than good enough for retailers reporting September same-store sales Thursday as cooler weather combined with a later Labor Day, and perhaps even some pent-up demand, to give results a slight lift.


While declines still outnumbered gains, although by a smaller margin, many stores beat their own expectations and those of analysts. A number of companies boosted earnings projections for the third quarter and beyond even as they “anniversaried” the onset of the credit crisis. Aiding the quest for higher profits was a continuing emphasis on inventory control, which some experts fear could put fourth-quarter sales opportunities at risk.

According to a Goldman Sachs September same-store sales composite index, not only did retailers top estimates with a 0.2 percent decline versus a forecasted 2.7 percent drop, but all three retail segments beat projections. September’s showing was the best since a 0.1 percent advance in April.

Wall Street was impressed with the results. The S&P Retail Index rose 6.98 points, or 1.8 percent, to 386.86, its fourth consecutive day of increases, and the comp-store sales data also contributed to smaller gains for the Dow Jones Industrial Average, ahead 0.6 percent to 9,786.87, and the S&P 500, up 0.8 percent to 1,065.48. Adding to the atmosphere of a retail recovery, and to stocks’ upward motion, was a report from the Labor Department that jobless claims last week hit their lowest level since January and were down for the fourth time in five weeks.

Still, the prospects for recovery remain far from certain.

“It’s a pretty low bar at the moment. I hope we’re not all kissing frogs here,” said Alix Partners LLC managing director Matt Katz. “Things are currently improving, but the question is, relative to what?”

Considering last year’s financial fallout, comp-store sales will continue to progress, Katz pointed out, but he expressed concern over apparel sales, with department and specialty stores affected the most.

Until unemployment begins to stabilize, consumers will continue to shop at value-oriented chains such as discounters, drugstores and club stores, he said. “I do not think the macroeconomics are aligned yet.”

In a Retail Forward survey conducted in September, consumers said they would keep their spending plans restrained for the month ahead, as well as for holiday.

“September’s numbers are a good sign that retail sales are on a path to recovery,” said Retail Forward senior economist Frank Badillo. “But it will be a slow, bumpy road as shoppers are cautious about easing the grip on their spending plans. It will take more time for sales declines to turn into gains for all retailers, and not all of them will benefit equally.”

This was evident among upscale department stores Saks Inc. and Neiman Marcus Inc., where declines moderated to 11.6 percent and 17.6 percent, respectively. Nordstrom Inc. topped estimates with a 2.4 percent dip.

While the upper tier struggled, the value channel continued to excel. Same-store sales at mass merchants tracked by WWD rose 2.9 percent, significantly better than September 2008’s 0.6 percent decline.

Off-pricers continued to lead the pack. Ross Stores Inc. boasted the segment’s best results, as the discounter reported an 8 percent gain for the month and lifted third-quarter earnings projections to 75 cents to 77 cents a diluted share, up from 44 cents, and fourth-quarter earnings per share of 88 cents to 94 cents. The TJX. Cos. Inc. posted a 7 percent increase for September and revised its third-quarter outlook to 71 cents to 74 cents a share versus 58 cents a share. Fourth-quarter EPS is expected to be in the range of 60 cents to 66 cents, up from 58 cents.

According to Lazard Capital retail analyst Todd Slater, “Although channel inventory is lean, TJX does not appear to be noticeably lacking any high-quality brands and merchandise. Further, an economic upturn should drive higher discretionary purchases, and with ‘value’ becoming a sustaining paradigm, TJX’s newly acquired customers should stick.”

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