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Retailers Post Solid Sales Gains in October

Retailers largely reported better-than-expected sales in October, providing some momentum heading into the Christmas holiday shopping season.

However, shopping patterns remain erratic, and retailers will need to work hard to win customer dollars. Shoppers held off buying early in the month as warmer temperatures prevailed. Once the cooler weather came, shoppers looked for discounts and fashionable products.

Parents shop in the toy aisle at a Target store, Kingston, Massachusetts
(AP)
Parents shop in the toy aisle at a Target store, Kingston, Massachusetts

Discounting played a significant role in driving sales, which is not surprising given that the month is one that is typically used by retailers move out fall merchandise ahead of the holidays.

"If there is any observation here it's that consumers have entrenched the 'buy now, wear now' mindset on discretionary purchases, said Brian Sozzi, an analyst at Wall Street Strategies. "Within that, the 'buy now, wear now' product better be the snazziest looking in the mall or offered at 30 percent off, or the retailer runs the risk of losing a ticket."

Some of the retailers that fared the best are the same ones that have showed momentum and solid sales gains in prior months, and these companies boosted their earnings forecasts for the fiscal third-quarter.

Teen retailer Zumiez said its same-store sales rose 21.5 percent in October, far above the 7.8 percent analyst estimate reported by Thomson Reuters.

The Limited continued its recent strong performance, with same-store sales gains of 9.0 percent, compared with a 6.1 percent estimate.

Department store chain Macy's also rang up another strong month as its exclusive brands and targeted merchandising is resonating well with shoppers. It reported a same-store sales rise of 2.5 percent in October, beating analyst expectations of a 1.6 percent increase.

"While we experienced some softness in sales early in October given the unseasonably warm weather, we ended the month with a strong trend going into the holiday selling season," Macy's CEO Terry Lundgren said.

Limited, Zumiez and Macy's were among the retailers who raised their third-quarter earnings forecasts.

Luxury retailers also showed some momentum, with Saks posting an 8.1 percent jump in same-store sales, far ahead of the 2 percent gain analysts predicted. Nordstrom also topped estimates with a 2.7 percent increase.

Warehouse clubstore Costco also outpaced analysts estimates with same-store sales of 6.0 percent, compared with an analyst estimate of 4.6 percent.

The misses were also noteworthy, particularly in the teen apparel sector. Hot Topic posted a 8.5 percent decline in same-store sales, much wider than the 3.2 percent decline analysts had projected.

Aeropostale also looks as though it losing the pricing war that is being waged in the sector, as brands such as Abercrombie & Fitch and American Eagle continue to lower prices.

But several analysts expect that consumers will spend at holiday time, as many have been spending conservatively in order to build up their savings for holiday gifts.

"Overall, we're going to have a better holiday season than we will see a fall season, but I think...we need jobs to stimulate retail sales," Dana Telsey, chief research officer at Telsey Advisory Group. "What's going to get my retail sales growing is having that unemployment rate go lower."

Complete results follow:

October 2010 Same-Store Sales

Retailers
October 2010 Estimates
October 2010 Actuals
Costco Wholesale 4.6% 6%
BJ Wholesale 2.3% 3.7%
Target 1.5% 1.7%
JC Penney 1.0% (1.9%)
Kohl's Department Store 2.3% (2.5%)
Dillards Department Store (1.0%) (1.0%)
JW Nordstrom 2.7% 3.4%
Saks Department Store 2.0% 8.1%
Stage Stores 1.5% (3.5%)
Macy's 1.6% 2.5%
Gap (2.5%) 2%
TJX (0.9%) Breakeven
Limited 6.1% 9%
Ross Stores 0.8% 4%
Stein Mart (1.0%) (6.5%)
Abercrombie 5.6% 2%
American Eagle 1.4% (2%)
Aeropostale 3.1% (2%)
Hot Topic (3.2%) (8.5%)
Wet Seal (3.8%) 4.1%
The Buckle 1.3% 2.6%
Zumiez 7.8% 21.5%
Source: Thomson Reuters,company reports. Figures in parenthesis are losses.

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