Trader Talk

Retail Sales Tomorrow—A Slow Start to Q4?

Editor's Note: Bob Pisani is on assignment, today's post was written by CNBC producer Robert Hum.

Traders will have their eyes on the nation’s retailers tomorrow as they report their November same-store sales numbers. Although a strong back-to-school season and an early flurry of cold weather helped boost retailers’ sales in September and October, November has been another story despite the very easy comparisons to last year’s figures.


Recall, in a number of earnings reports released last month, some retailers commented on a weak start to November sales. Saks warned that it expects November to be the “weakest monthly comparable store sales performance in the fourth quarter,” while discounters like Target cautioned of pressures related to a “highly promotional holiday season” ahead.

Furthermore, many other retailers remained cautious when providing Q4 earnings guidance, with their outlooks generally falling at the low end or below Street estimates.

Despite the weak start to the fourth quarter, retailers hoped they could still lure in shoppers towards the end of the month –as the holiday shopping season kicked off with Black Friday. In fact, retailers began heavy promotions in the days leading up to Black Friday, and on Black Friday itself, seeking to entice shoppers to the stores. With the poor start to the month already in the bag, stores depended on Black Friday to essentially make or break their November sales results.

Did it work?

Well yes – and no.

The good news: various retailers, along with the National Retail Federation, reported modestly higher traffic on Black Friday compared to last year.

The bad news: overall spending rose only fractionally from Black Friday 2008, while average spending per shopper fell a more noticeable 8 percent from last year.

The bottom line for retailers on Black Friday: Converting traffic into sales is remained difficult. While retailers successfully got shoppers into their stores, consumers are still hesitant to open up their wallets – to the chagrin of the retailers.

Consumer Nation Holiday Central Edition

The combination of poor sales early in November and a fairly disappointing Black Friday may not bode well for the retail sales reports tomorrow. Tight consumer spending and intense price wars may continue to put pressure on sales and margins for the nation’s retailers.

According to Retail Metrics, industry same-store sales are expected to rise 2.2 percent (less than the 2.6 percent gain forecasted at the beginning of the month). Still, that is a meager gain considering the extremely easy comps from last November, when same-store sales plunged 7.3 percent from 2007 levels.

Specific areas of concern tomorrow: department stores and teen apparel retailers, whose sales are expected to lag the industry average with disappointing sales late in the month. The weakness in department stores is particularly surprising. According to Retail Metrics, department stores saw some of the best retail traffic the weekend after Thanksgiving, but may have ultimately failed to convert much of the high traffic into sales.



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