Retail Sales: October "Cruelest" Month Or Can It Get Worse?
Here's a closer look at today's same store sales numbers. October was not kind to Wal-Mart even with the promotional pricing and marketing campaign that the world's biggest retailer has been pushing. The only sales growth at Wal-Mart storeswas 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 (6.9%)and Target (+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 +10.6% and teen retailers Zumiez 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 will have a Reward zone discount shopping event for frequent customers this weekend. Competitor Circuit City 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 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 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.
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