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NEW YORK — Gap Inc.’s first positive same-store sales results in 2 1/2 years were the most dramatic of a series of October surprises reported by retailers Thursday.

This story first appeared in the November 8, 2002 issue of WWD.  Subscribe Today.

A majority of the nation’s retailers reported same-store sales results that exceeded sluggish year-ago results, as well as already-lowered expectations. October’s pickup came despite murmurs of a war and waning consumer confidence, factors that were expected to cause a drag on the month just as they did in September.

Apparently, pent-up demand and cooler temperatures exerted greater influence as consumers focused on apparel last month for the first time since the spring-summer period. While the weather drove demand for sweaters and outerwear, easy comparisons from last year’s post-Sept. 11 downturn helped some specialty stores and apparel-based mass merchants post double-digit comp increases.

Even so, the results could be looked at as a minor victory, considering the depressed levels last year.

Propelled by impressive gains at its Old Navy division, Gap Inc. ended 30 straight months of negative comp results with an 11 percent comp gain for October, and raised its third-quarter earnings guidance to 12 to 14 cents a share, at least 50 percent higher than the 6-cent consensus estimate for the specialty retailing heavyweight.

The last time Gap reported a positive comp was April 2000’s 7 percent increase.

Specialty stores reported the most improved sales trends for the month as comps rose by double digits at Old Navy (24 percent), Pacific Sunwear (18.6 percent), Chico’s (18.1 percent) and Aeropostale (11.7 percent).

Department stores also regained some sales momentum this October with strong advances by Kohl’s (18.3 percent), J.C. Penney (13.7 percent) and Nordstrom (9.6 percent). Discount chains, while carrying the group for much of the year, showed some signs of slowing down, as Wal-Mart rose 3.7 percent and Target 2.1 percent.

Overall, the Goldman Sachs comparable-store sales index for October rose a slightly better-than-expected 2.5 percent compared with the 0.9 percent increase last year. By sector, specialty stores extended 5.1 percent, versus a negative 6.6 percent last year, and department stores decreased 0.4 percent, better than the 4.3 percent reversal last year. The discount arena grew 3.2 percent, but it was smaller than the 4.6 percent increase last year.

“If you take out last year, it was still a surprise,” Steven Skinner, a partner in the retail industry group at Accenture, said. “It is one thing to post an increase, it is another to post a large increase.” He said this is the first time he has seen retailers take advantage of easier comparisons by promoting earlier and moving holiday assortments on the floors earlier in the season

Daniel Barry, a senior retail analyst at Merrill Lynch, said: “It is very clear we had much colder weather this year than last and apparel sales were very strong, but the good weather [for retailers] is masking a slowdown in consumer spending.”

While analysts and observers were relieved to see sales and margin improvements, many said one month of improvement didn’t constitute a recovery or necessarily presage a decent holiday. Several cautioned results for the remainder of the year have several obstacles to overcome, including a shorter holiday selling season, no must-have items, more difficult year-ago comparisons and the continuing threat of war. Additionally, with a surge in sales last month and the dock lockout, there’s some question regarding whether or not holiday inventories will be sufficient.

“No, there is no sign of a mend,” Barry said. “We are heading into a difficult sales environment at Christmas and beyond.” Barry said he is forecasting a 3 percent gain for general-merchandise sales, the smallest increase since the recession of 1990-91, when holiday sales fell 0.2 percent. Last year, holiday sales rose 8.6 percent.

Mike Green, vice president of the retail practice at Cap Gemini Ernst & Young, said October will be put in the books with an asterisk because of the huge impact made by last year’s terrorist attacks. “I do not believe [October’s results] are a prediction the economy is turning around or consumers are going to continue to spend.”

However, retail executives have been rewarded for their recent belt-tightening strategies, including slashing expenses and inventories, as third-quarter outlooks were pumped up by a slew of companies, including J.C. Penney, Federated Department Stores, Kohl’s, Gap, American Eagle Outfitters, Abercrombie & Fitch, Ann Taylor, Talbots, Aeropostale, Chico’s, Hot Topic and Urban Outfitters.

SPECIALTY STORES

Gap Inc.’s dramatic 11 percent comp improvement, its first since April 2000, was driven by significantly higher-than-expected same-store results in all three of its divisions. Old Navy was up 24 percent, Gap, 1 percent, and Banana Republic, 6 percent.

Heidi Kunz, Gap’s chief financial officer, said on a prerecorded call that the company’s improvement was due to improved traffic trends and a strong response to its fall fashions.

“Holiday flow dates remain on plan, but the impact of the [West Coast dock] closure will be seen in the completeness of the initial setups and the replenishment order,” Kunz said. She noted Gap anticipates the impact to fourth-quarter earnings will be in the middle of the 2 to 7 cents-per-share range previously given.

Limited Brands reported an overall comp increase of 3 percent and 4 percent at its apparel brands. By division, comps were positive at Victoria’s Secret stores (6 percent), Express (4 percent) and Limited stores (6 percent); flat at Lerner, and down 4 percent at Bath & Body Works.

Teen retail results were mixed. Top performances again came from Pacific Sunwear of California (up 18.6 percent), Hot Topic (8.1 percent), Aeropostale (11.7 percent) and Claire’s Stores (9 percent). Going in the other direction were American Eagle Outfitters Inc. (down 2 percent), Abercrombie & Fitch (down 3 percent), Wet Seal (9.1 percent) and Bebe (4.7 percent).

Noting American Eagle’s significant improvement from September’s weak trend, Laura Weil, chief financial officer, said during a call, “Cooler weather helped to spur stronger mall traffic, which contributed to increases in transactions per store and unit productivity. We are encouraged by the continued momentum in women’s, which strengthened during the month.” Women’s comps were positive in the mid-single digits.

Continuing to outpace its peers, Pacific Sunwear of California said comps rose 18.6 percent, with PacSun up 18 percent and Demo up 23.4 percent. Comps rose for male and female apparel (8 and 25 percent, respectively), footwear (35 percent) and accessories (25 percent).

The missy specialty store business also reported a strong October. Talbots, Ann Taylor and Chico’s FAS reported positive comps of 1.7 percent, 0.2 percent and 18.1 percent, respectively, driven by strong full-price selling. All also upped quarterly guidance.

DEPARTMENT STORES

Federated Department Stores Inc.’s October same-store sales inched up 0.3 percent, a better showing than adjusted expectations of a 1 to 2 percent decrease. Accordingly, Federated is looking for third-quarter earnings of 36 to 38 cents a share, above previous guidance of 30 to 35 cents. November comps are expected to slide 2.5 to 4.5 percent while the combined November-December period is slated to post a flat to down 2.5 percent result.

While May Department Stores Co.’s comps dropped 7.1 percent in October, Kohl’s Corp. defied gravity with an 18.3 percent same-store run-up. “For the month, all seasonal apparel businesses were significantly above last year with all major merchandise classifications delivering double-digit comparable-store-sales increases,” said chief executive Larry Montgomery in a statement.

J.C. Penney Co. also excelled with comps in its department stores surging 13.7 percent for the month. On a recorded call, a spokesman said third-quarter earnings are slated to exceed Wall Street’s current projections of 23 cents a share.

While its apparel trends “demonstrated substantial improvement from recent trends,” Sears, Roebuck & Co.’s comps slumped 10 percent for the month. Within the firm’s full-line stores, softline comp sales slid by high-single digits, while the women’s and men’s categories were each down by a percentage in the low-single digits.

Comps at Dillard’s Inc. in October slid 2 percent.

Saks Inc.’s overall comps dipped 0.7 percent for the month while its Saks Fifth Avenue unit saw a 1.4 percent increase and its department stores slid by 2 percent. Neiman Marcus Group Inc.’s comps stood on par with a year ago in October.

Nordstrom Inc.’s same-store sales managed to jump 9.6 percent for the month.

MASS MERCHANTS

Overall, same-store sales at Wal-Mart Stores pushed up 3.7 percent in October. The flagship division managed a stronger 4.8 percent increase, while Sam’s Club was “disappointing” overall and fell 1.6 percent. The plan for the Wal-Mart division and the overall company was for a 2to 4 percent comparable-store sales uptick.

A spokeswoman on a recorded call said, “Apparel sales are back on plan for the fall season.”

With seven fewer post-Thanksgiving shopping days in fiscal November this year, though, Target Corp. expects November comps to fall 8 to 10 percent for the Target unit and the whole company. However, combining December, which picked up one more preholiday shopping day versus a year ago, and November, the firm said it expects to produce a comp showing that’s somewhere between flat and up 2 percent.

In October, Target overall comps inched up 1.5 percent, while the firm’s namesake division beat plan with an increase of 2.1 percent. The Minneapolis-based discounter had been looking for a flat to 2 percent increase showing at Target with the overall company trailing that result. Comps at Mervyn’s dropped 5.7 percent, while same-store sales at Marshall Field’s ascended 5 percent.

TJX Cos., which drove comps for October up 7 percent, also said it would take a charge of 2 cents a share during the third quarter to settle several lawsuits.