Retailers Tally Up October Sales, Get a Shock

Same-Store Figures Worst in 40 Years; Wal-Mart Alone Among Gainers

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NEW YORK ( -- October was a bloodbath for retailers, with department stores, luxury purveyors and teen retailers all posting terrible results with one exception: Wal-Mart buoyed the sector with a 2% sales gain at stores open at least a year.

According to the International Council of Shopping Centers, same-store sales across the retail channel fell 1%, the worst October performance since at least 1969. If Wal-Mart had been excluded, sales would have plummeted nearly 5%.

Sales promotions ineffective
That retailers have been consistently promoting seemed to have little impact on distressed consumers. Retailers gaining little traction were forced to turn to what Richard Jaffe, an analyst with Stifel Nicolaus, characterized as "aggressive, unplanned, reactionary" sales events. That improved sales trends late in October, but it was not nearly enough to salvage the month.

"The turmoil on Wall Street, the presidential campaign and the growing economic pressures have proven sufficient to distract consumers, keeping them out of stores," Mr. Jaffe wrote in a research note.

Predictions that the tanking stock market would slam luxury retailers came to fruition as the category was among the hardest hit. Neiman Marcus, which operates Bergdorf Goodman, reported a 28% decline in same-store sales. Saks Fifth Avenue and Nordstrom also saw double-digit declines of 17% and 16%, respectively.

"As we have said, we expect retail demand will remain weak for an extended period of time as our affluent customer reacts to the continuing volatility of the financial markets," said Burton Tansky, chairman-CEO of Neiman Marcus. "In response to the challenging business conditions, we continue to take actions to stimulate sales through additional promotional events and other activities which result in higher markdowns and related expenses."

Red is the new fall color
Teen and specialty retailers didn't fare any better, with Abercrombie & Fitch posting a 20% plunge and Gap Inc. reporting a 16% drop. Limited Brands, which operates Victoria's Secret, and American Eagle also saw declines of 9% and 12%, respectively.

In the department store sector, JCPenney was walloped with a 13% drop in same-store sales. In a conference call, the retailer said its marketing will focus on "smart pricing" and include a "robust" calendar of promotional events. Its holiday campaign, which launches on Nov. 14, is expected to focus on value.

Macy's, which had suspended its reporting of same-store sales, reinstated the practice in October. It reported a decline of 6%. Kohl's reported a 9% drop in same-store sales.

Target, meanwhile, reported a 5% falloff in same-store sales. Gregg Steinhafel, president-CEO of Target, said the chain expects challenging sales trends to continue throughout the holiday season and beyond. Costco was also down 1%.

Caution: holidays ahead
Weak holiday sales are widely expected, but declines of the magnitude reported in September and October could be disastrous for the sector. "While there are some positives, the consumer has remained extremely worried and confused, which has resulted in buyers focusing even more on what they must have or what adds extraordinary value to their lives," wrote Eric Beder, an analyst with Brean Murray Carret & Co., in a research note. "As such, we are now in a race to see which can go lower, investor expectations or reality; frankly, we think expectations are winning, but not by a large amount. The next few weeks, the heart of the retailing earnings season, will tell the tale."
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