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Warm weather contributes to October retail sales drag

NEW YORK — Americans took a pause in shopping in October, leaving retailers with their weakest performance since April as unusually warm weather depressed their appetite for cold-weather items.

Stores were forced to discount more on coats and hats to get shoppers to spend. And even as the weather cools, discounts will be necessary to keep pulling shoppers in amid high unemployment, analysts said.

The International Council of Shopping Centers index measuring revenue at stores open at least a year showed a 1.6 percent increase, the weakest performance since April's 0.8 percent increase. October's figure represented a slowdown from September, when it rose 2.6 percent.

Bright spots among retailers reporting revenue figures Thursday were Costco Wholesale and Limited Brands, both of which reported bigger increases than Wall Street analysts expected. Macy's, helped by tailoring merchandise to local markets, also had a decent performance, outshining rivals such as J.C. Penney and Kohl's, both of which suffered sales declines. Target posted a small gain that's slightly above Wall Street estimates, while Gap posted a surprise gain.

Luxury chains like Saks continued to do well as wealthy shoppers are back to spending, albeit cautiously.

"It was a promotionally driven month," said Jharonne Martis, director of consumer research at Thomson Reuters. "Warm weather hurt sales of fall merchandise. We expect discounting is going to be necessary to drive holiday sales."

The figures are based on revenue at stores open at least a year. That's considered a key indicator of a retailer's health because it measures growth at existing locations and excludes new or closed stores.

For retailers, the good news is that heavy discounting may not hurt third-quarter profits because October is the least important month for the period, said Ken Perkins, president of RetailMetrics, a research firm. Macy's and Limited raised their earnings outlook.

Shoppers are expected to remain tight-fisted with unemployment stuck near 10 percent. That's why many more stores than last year are pushing discounts on holiday gifts earlier, even before Halloween.

Americans are also being bombarded with holiday ads on TV. Best Buy, for example, started its holiday TV ad campaign Monday; last year, it began Nov. 11.

Target posted a 1.7 percent gain in October, slightly better than the 1.5 percent estimate from analysts. Target CEO Gregg Steinhafel noted traffic is healthy in stores, and the company is seeing essential items sell better than discretionary items. Target, which is counting on a much-publicized 5 percent discount to store credit and debit card holders, said it expects revenue at stores open at least a year to increase in the low-single-digit percentage in November.

Retail roll call

Summary of revenue at stores open at least a year

in October for major retail chains, with percentage increase

or decrease over the same month last year:

DISCOUNT STORES

BJ's Wholesale Club: +3.7%

Costco Wholesale: +6%

Target: +1.7%

DEPARTMENT STORES

Dillard's: -1%

J.C. Penney: -1.9%

Kohl's: -2.5%

Neiman Marcus: +11.5%

Nordstrom: +3.4%

Macy's: +2.5%

Saks: +8.1%

CLOTHING STORES

Abercrombie & Fitch: +2%

Aeropostale: -2%

Gap: +2%

Hot Topic: 8.5%

Limited Brands: -9%

Ross Stores: +4%

Stein Mart: +6.5%

TJX: no change

DRUGSTORES

Rite Aid: -1.7%

Walgreen: -1.3%

Warm weather contributes to October retail sales drag 11/04/10 [Last modified: Thursday, November 4, 2010 10:33pm]
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