NEW YORK — Retailers across all channels got the sales boon they needed in October, making the month one of the strongest in comps so far this year.
Regarding the luxury goods retailers, October comps sparkled. Neiman Marcus reported a 7 percent increase, Nordstrom’s gain was 6.4 percent and Saks Fifth Avenue Enterprises delivered a 10 percent gain in the month’s comparable-store sales.
A seasonal cold snap that arrived late in the month, successful merchandising, some promotions and, to a degree, replacement purchases due to the recent hurricanes, pushed consumers into stores to pick up long-sleeved T-shirts, sweaters, shoes and accessories they didn’t feel compelled to buy during the mediocre back-to-school shopping season.
Of the retailers tracked by WWD, the specialty sector had an average same-store sales gain of 7.1 percent while department stores were up 4.6 percent and mass retailers up 2.9 percent. October’s results pumped up industry views that the holiday season has the potential to succeed. Consumers might be able to navigate the anticipated impact of rising home heating costs on gift purchases during November and December, and keep spending strong.
“We’ve all been pummeled with stories about how gas went up year-over-year and is sucking away everybody’s money, but the reality is more subtle,” Richard Hastings, senior retail sector analyst at Bernard Sands LLC, wrote in a note to clients Thursday. “Retail prices haven’t budged and the value proposition has improved: better styles, better replenishments, better pricing flexibility and sharper timing of promotions. Energy inflation has been offset by better retailing and changing shopper behaviors.”
By channel, discounters such as Target Corp. and Wal-Mart Stores Inc. performed well thanks in part to sales of food and household items. For Wal-Mart, with a 3.9 percent increase at its discount stores, it was the best performance from the division in four months. Target, which had a 5.7 percent gain in October comps, said on a recorded call that women’s apparel, boys’ and girls’ apparel, household, personal and baby and shoes were the strongest-selling categories during the month.
“If the economic times are so bad, why is Target booming?” said Mark Rein, senior manager of consultancy for Capgemini’s global retail practice. “Why is Chico’s selling their stuff like crazy at good margins? Where are teenagers finding all the money” to shop at specialty stores? “The companies are getting very scientific about merchandising and they’re marrying a scientific approach to the old merchant feel for what’s attractive to the consumer.”
At moderate department stores, October’s results were promising as well. Dillard’s Inc. posted an 8 percent jump in October comps, Kohl’s Corp. came in with a 6.2 percent gain, Stage Stores saw comps jump 14.9 percent and J.C. Penney Co. Inc. reported a 2.4 percent comp advance.
Meanwhile, a disappointment in the department store group was Federated Department Stores Inc., which reported a 0.7 percent decline in the month’s comps. The company said its comps only include same-store sales from its Macy’s and Bloomingdale’s locations and not the newly acquired stores from May Department Stores Co. Federated blamed the effects of Hurricane Wilma, which damaged 36 Macy’s stores and five Bloomingdale’s stores, for the month’s comp results; the company said the storm negatively affected October comps by 1.7 percent and third-quarter comps by 0.5 percent.
Overall, though, October sales were robust. According to the International Council of Shopping Centers, October was the third-strongest month of calendar year 2005 as comps rose 4.4 percent — ahead of expectations for a 4 percent rise — for the 69 chain stores it tracks. Year-to-date comps are up 3.9 percent, according to ICSC data.
“October’s sales performance highlights that there is underlying demand across sectors and it remains relatively steady as we head into the holiday season,” said Mike Niemira, chief economist and director of research at the ICSC, in a written statement.
Of the 50 retailers tracked by WWD, 34 posted positive October comps and 15 had negative results. Due to its acquisition by Federated, May’s results were not available.
In the specialty sector, comp results were once again mixed as larger specialty chains, such as Gap Inc. and Limited Brands Inc., posted comps that fell 5 and 3 percent, respectively. In Gap’s three divisions, Banana Republic’s comps slipped 8 percent, while Gap saw comps fall 3 percent and Old Navy said comps slid 6 percent.
Gap senior vice president of treasury and investor relations, Sabrina Simmons, said on a recorded call that fall clearance levels have left October merchandise margins below last year’s levels. Traffic, however, improved at the end of the month, she said. At Gap, outerwear and sweaters performed well for women, and in men’s, knits, outerwear and sweaters were strong.
Simmons said for the Gap brand, the company does not plan to run television ads during the holiday and will instead focus on improving in-store windows, magazine ads and create a “megalogue,” which she described as “a widely distributed product book with a gift-giving message that initially drops in mid-November.”
However, elsewhere in the specialty sector, Abercrombie & Fitch Co., Chico’s FAS, American Eagle Outfitters Inc. and Wet Seal Inc. saw respective double-digit comp increases of 31 percent, 17.9 percent, 17.3 percent and 46.6 percent. American Eagle upped its third-quarter earnings-per-share guidance to 45 to 46 cents, from a prior guidance of 43 to 44 cents, thanks to strong October sales trends and a lower effective tax rate.
One reason these specialty retailers have been successful, according to Janet Hoffman, a partner in Accenture’s retail practice, is because they know their customer and haven’t grown too big so as to be out of touch with them.
“If you look at Limited [Brands] and Gap, they clearly are struggling with the question of how to scale against the new agile entrants, the Wets Seals and Chico’s, [who] are demonstrating the … flexibility to stay in front of the game. So the challenge is, ‘How do I keep agile as I scale?'” Hoffman said.