Retail Sales: October "Cruelest" Month Or Can It Get Worse? - Holiday Central

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It's a make-it or break it time for retailers. The holiday selling season is always a critical time for retailers, but this year this may be even more true. With several retailers already falling victim to a drop in consumer spending, and filing for bankruptcy, retailers will be navigating through some tricky waters. Consumers are strapped for cash due to high energy and food prices, and unemployment is rising. The recent credit crunch has made it more challenging for retailers and consumers to borrow.

This blog will look at the winners and losers in the retail space. Who has the right strategy to capture consumer dollars? It also will look for trends in consumer spending and how that will impact the economy.

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Nov.08

11:45 AM ET

Thursday, 8 Nov 2007

Retail Sales: October "Cruelest" Month Or Can It Get Worse?

Posted By:Margaret Brennan

Topics:Stock Market | Consumers | Retail Sales

Sectors:Personal and Household Goods | Retail

CNBC.com
Here's a closer look at today's same store sales numbers. October was not kind to Wal-Mart [WMT Loading... () ] even with the promotional pricing and marketing campaign that the world's biggest retailer has been pushing. The only sales growth at Wal-Mart stores was at its Sam's Club division (+2.7%) which helped boost the overall Wal-Mart comp to a meager .4% gain.

Keep in mind that the weak gain happened after Wal-Mart rolled out markdowns on more than 15,000 items. That said, the discount space was one of the few areas that saw sales gains. Shoppers stuck to buying basics at Walgreens [WAG Loading... () ] (6.9%)and Target [TGT Loading... () ] (+4%) and spent a lot less on discretionary items like coats, sweaters and clothing.

The apparel sector was hit hard. The only department store to post positive same store sales was Saks [SKS Loading... () ] +10.6% and teen retailers Zumiez [ZUMZ Loading... () ] was able to buck the downward trend thanks to being on top of the fashion cycle. More than 64% of the nation's biggest retailers missed sales estimates for last month.

Wall Street had fair warning that retailers were going to post weak sales results for the month of October and that's why you're seeing short-covering of retail stocks today.

What I'm watching is to see just how effective promotions/markdowns are in bringing shoppers into stores. The gimmicks run for freebies to competitors to speedy shopping incentives. While pricey promotions, these may work better than outright markdowns which hurt margins and may not build traffic as effectively. We'll see if it works.

Best Buy [BBY Loading... () ] will have a Reward zone discount shopping event for frequent customers this weekend. Competitor Circuit City [CC Loading... () ] is giving away 30 free Mazda cars and electronics to customers who come in store to play their "drive to 65" instant win game. J. Crew [JCG Loading... () ] is creating "gift card kiosk" express lanes for customers who want to shop quickly and not wait on line with customers making product purchases.

Interestingly, Victoria's Secret CEO Sharen Turney told me yesterday that the store does not plan on marking down heavily like they did last year. (VS's same store sales were down 7% in October which dragged down parent company Limited's [LTD Loading... () ] overall comp to down 6%.)

Can their marketing and new product get shoppers excited enough to spend on lingerie when they aren't on other clothing items? We'll have to see. Her interview will air later this month on CNBC before the December 4th runway show.

Questions? Comments?

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