Retailers are beginning to get back on their feet.

This story first appeared in the November 2, 2012 issue of WWD. Subscribe Today.

Although there were a few misses, the rapidly shrinking list of stores that still report comparable-store sales posted mainly solid results in October, prompting many to raise estimates for the third quarter. The number of companies reporting will be reduced by one in fiscal 2013 as Kohl’s Corp. will stop releasing monthly sales data, citing a desire to “align with the wishes of its investors and the practice of the majority of its retail peers.”

Overall, the Thomson Reuters October scorecard saw sales rise 4.7 percent in October, exceeding the firm’s estimate of 4.3 percent, while Barclays’ broadlines/department stores index hit 5.1 percent, above the firm’s expectation of 4.6 percent.

Merchants in all categories notched gains and are expecting the momentum to carry through to the all-important fourth quarter and holiday season. The only potential wildcard is Hurricane Sandy which wreaked havoc on the Eastern seaboard at the end of the month. Thousands of retailers in the area were forced to close for several days, but physical damage to stores was limited.

Terry J. Lundgren, chairman, president and chief executive officer of Macy’s Inc., which reported a comp-store increase of 4.1 percent in October, said he feels “confident about our prospects for the upcoming holiday season and have increased our sales guidance for the fall season, despite the interruption caused by Hurricane Sandy in the first few days of the fourth quarter. More than 200 Macy’s and Bloomingdale’s stores were closed for some period of time — ranging from a few hours to multiple days — as a result of Hurricane Sandy. The company is confident that it can make up some or most of the lost sales through the remainder of the quarter.”

As a result, Macy’s raised its guidance for the second half to 4 percent from 3.7 percent, which anticipates a same-store sales gain of 4.2 percent for the period.

“Superstorm Sandy impacts were modest in terms of October sales, with strong pre-storm buying possibly even giving a slight lift in certain category sales,” said Michael P. Niemira, vice president of research and chief economist for the International Council of Shopping Centers. “November sales expectations should remain in-line with October results, with some business being affected more severely by the aftermath of Sunday, but some holiday and replacement demand kicking in later in the month.” For November, ICSC is expecting sales to rise between 4.5 percent and 5.5 percent.

Arnold Aronson, senior advisor and managing director of retail strategies at Kurt Salmon, said of October’s results: “The numbers are very good, with an emphasis on very. Kohl’s is coming back, Bon-Ton and Macy’s are doing well and Nordstrom’s comps were up nearly 10 percent. These are big numbers and each month they keep getting bigger as we get further into the fall season. Nobody should break out the Champagne, but the consumer is alive and well and consumer confidence is improving.” Gas prices have dropped, the election will be over so the “distractions” will be fewer, and “we’re seeing the gains spread across the board in all channels and businesses and that’s encouraging,” he said.

The Consumer Confidence Index rose for the second month in a row to 72.2 in October. IHS Global Insight is forecasting holiday sales will rise 4.5 percent above last year, and the boost in the consumer mood will help holiday sales.

IHS economist Chris G. Christopher, Jr. expects that the impact from Hurricane Sandy on holiday sales will be short-term. And while spending over the next couple of weeks may be mostly for building materials, automobile repairs or replacement items, things should return to normal by the “back end of November.”

As for apparel sales, the economist said, “For apparel, don’t expect consumers to head to the high-end stores, but family clothing should do well. One pattern we’ve seen outside of the hurricane is the bifurcation of the American consumer. They are going to the lower end and the upper end, your luxury and discount stores, while the ones in the middle tier are struggling.”

According to a Deloitte spokeswoman, the consulting firm also isn’t anticipating a major impact from Hurricane Sandy on the holiday season as a whole, and is keeping its forecast at between a 3.5 percent to 4 percent gain in holiday sales.

Aronson, too, is not expecting a big impact from the hurricane. “It was terribly devastating, but it was localized,” he said. “The good weather now is enabling work to start quickly and effectively and the money people will be getting from the government and insurance companies will help them get through this. We are a consumption society and people are spending.”

Tom Clarke, director in the retail practice of AlixPartners, said October is generally “a transitional month” so he’s not expecting a significant impact from the storm. “But we will see a shift in the channel spend,” he added, with home supply stores and retailers selling basic necessities benefiting the most. Clarke also believes apparel retailers may see an uptick as well, as those affected by the storm increase their purchasing of winter apparel. But spending on fashion items may be impacted for a while.

“We may see a bit of a reduction in discretionary spending on fashion items, but retailers who can reallocate their mix will benefit,” said Clarke.

He said one surprise in the October sales numbers is that all manner of retailers performed well. “From discounters to mass merchants, they continue to do well. And the department stores all beat projections. That’s a positive trend for the fourth quarter. I’m still bullish and think it will be a robust holiday season. There’s pent-up demand and consumer confidence is up.” Even so, Clarke believes the battle for market share will continue to be fierce, with online retailers continuing to chip away at brick-and-mortar stores, and promotional activity remaining aggressive.

Michael Brown, a partner in the retail practice of A.T. Kearney, said he wasn’t surprised by October’s results. “We had a strong August, then there was a blip downward in September, but October was good. Retailers are showing strength and consumers are out shopping again.”

Although the limited number of retailers who report monthly sales makes it hard to gauge the health of the overall market, the fact that retail sales and consumer confidence are both up and the “majors are all moving in a positive direction” all bode well for the future.

“I don’t think the hurricane will have any impact on holiday sales,” Brown added. “You have to remember that we’re anniversarying a serious Nor’easter that moved through the same area at the same time last year with record snowfall and power outages. So I think it will have minimal impact on November sales.”

He did acknowledge that there may be “shifts in where the dollars are being spent,” but expects a significant amount of money to flow into retailers’ coffers as a result of the storm. “The impact of the hurricane is estimated at $20 billion, so there’s going to be a lot of money being spent on replacement goods from various sources.”

As a result, Brown said he remains “upbeat” about holiday and is holding to a 3 percent projected increase for the period.

“The trends are strong and that will continue through the holiday season,” he said, noting that those retailers who can “integrate their online and store channels most seamlessly will be poised for success.”

Barclays, however, was less upbeat, expecting retailers with a strong presence in the Northeast to be affected by the aftermath of the hurricane. The company said it is expecting November comp-store sales to rise 3 percent, compared to a 4.2 percent gain last year and a “negative impact from store closures in the mid-Atlantic and Northeastern regions due to Hurricane Sandy. Our companies with the highest East Coast exposure based on number of stores include Macy’s (30 percent), Saks (27 percent), Kohl’s (25 percent), Target (22 percent), J.C. Penney (21 percent) and Nordstrom (21 percent). Stage Stores is the most insulated from the impact, with only 16 percent of stores in the affected regions, while Wal-Mart and Costco also have lower exposure and may benefit from stocking ahead of the storm,” the company said in a report Thursday.

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