U.S. retailers’ sales rose in October as cooler-than-normal weather spurred demand for clothes at department stores. Discounters and apparel outlets posted results that missed analysts’ estimates.
Federated Department Stores Inc., J.C. Penney Co. and Nordstrom Inc. reported sales today that exceeded projections. Wal-Mart Stores Inc., the world’s largest retailer, said sales at stores open at least a year grew 0.5 percent, and it forecast unchanged sales for November. Target Corp. reported a 3.9 percent rise, short of the 4.3 percent average estimate.
October sales at 57 chains surveyed by the International Council of Shopping Centers rose 3 percent, the slowest growth since June. Consumers may have held off on spending as they geared up for the holiday season, which accounts for a fifth of retailers’ revenue and is the most profitable period for many.
“The consumer took a break here in October after going hog wild in September,” said Ken Perkins, an analyst with Retail Metrics LLC in Swampscott, Massachusetts. “I think the consumer is going to hold up here in November and December.” Sales rose 3.8 percent in September.
Wal-Mart’s shares fell 70 cents, or 1.4 percent, to $48.15 at 11:57 a.m. in New York Stock Exchange composite trading. J.C. Penney rose $1.27, or 1.7 percent, to $76.40. The Standard & Poor’s 500 Retailing Index of 28 companies declined 0.5 percent to 493.68. The gauge has risen 8 percent in 2006, trailing the 9.6 percent advance in the S&P 500.
Consumers Cite Weather Consumers cited weather as the primary reason for buying clothing, according to an ICSC survey conducted late last month.
October’s average low temperature was 46 degrees Fahrenheit, 3 degrees lower than a year earlier, making it the third coldest October in 10 years, according to Planalytics, a Wayne, Pennsylvania-based weather-consulting firm.
The month’s wet and cold weather benefited department stores over stand-alone retail outlets, wrote Bethlehem, Pennsylvania-based Weather Trends International, another weather-consulting firm.
Wal-Mart, the world’s largest retailer, blamed its smallest gain since a similar increase in August 2004 on weak demand for new, more fashionable clothing and disruptions from store remodeling. The Bentonville, Arkansas-based company previously forecast a 2 percent to 4 percent rise.
Wal-Mart’s Drag Because Wal-Mart’s results were “company-specific in nature,” the drag on the overall sales number should be factored out, Perkins wrote in a report yesterday.
Sales excluding Wal-Mart gained 4.9 percent, faster than the year-to-date pace of 4.6 percent, ICSC Chief Economist Mike Niemira said.
Kohl’s Corp. said sales rose 4.2 percent, less than the average estimate of analysts surveyed by Retail Metrics. Costco Wholesale Corp., the largest U.S. warehouse-club retailer, said sales gained 4 percent, missing the 4.3 percent average estimate.
Gap Inc., the largest U.S. clothing retailer, said sales fell 7 percent, missing analysts’ forecast for a 2.5 percent drop, after demand at its Gap, Old Navy and Banana Republic chains declined. It forecast third-quarter profit of as much as 23 cents a share. The shares fell as much as 7.5 percent.
Federated, the second-biggest U.S. department store operator, said sales increased 7.7 percent, more than analysts’ estimates for a 6.1 percent gain. Its Macy’s and Bloomingdale’s stores gained while former May Department Store Co. stores, converted to the Macy’s name in September, trailed.
The Cincinnati-based retailer forecast a sales increase of 3 percent to 5 percent for November and the fourth quarter.
Penney, Nordstrom J.C. Penney Co., the third-biggest department store, said sales gained 8.1 percent, higher than average estimate of 5.5 percent. J.C. Penney, based in Plano, Texas, cited demand for clothes and accessories. It said third-quarter profit would be $1.22 a share, up from a previous forecast of $1.11, and it projected November sales growth in the “low single digits.” Seattle-based Nordstrom Inc. posted a 10.7 percent increase, almost double analysts’ estimate for a 5.7 percent gain. Saks Inc., based in Birmingham, Alabama, had a 9.2 percent increase, more than twice analysts’ estimates.
Discretionary purchasing power improved as gasoline prices receded, Niemira said. The average price of a gallon of gasoline in the week ended Oct. 30 was $2.22, down 11 percent from a year earlier, according to the U.S. Energy Department.
Tight inventories will help retailer profitability by reducing the need for markdowns to generate sales, said Sovereign Asset Management’s Sarah Henry, whose firm holds Wal- Mart shares.
Stores will have a 5 percent gain in total holiday sales, smaller than last year’s 6.1 percent rise, the National Retail Federation forecast on Sept. 19.
