Chain Stores Show Some Fall Spirit

Overall, same-store sales were stronger than expected at most retailers.
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Updated from 9:52 a.m. EST

National retail chains had their best month in half a year in October, but analysts said it's still too early to call a robust holiday.

While individual sales reports showed various strengths and weaknesses, retailers posted a 4% gain in overall same-store sales, or sales at stores open at least a year, according to Michael Niemera, chief economist and director of research with the International Council of Shopping Centers.

The ICSC records a monthly rate for same-store sales growth based on a survey of over 70 major retail chains throughout the U.S. October's number came in at the upper end of the estimated range of 3% to 4%.

"This is a good lead into the holiday season, but I don't necessarily think it's a bellwether of the holiday season in and of itself," Niemera said. "For many years, we've seen retailers' performance change very dramatically in the November and December period for better or for worse."

Others were more sanguine about the month's results.

"We are not surprised to see strength in chain store sales in October," said Richard Hastings, a retail analyst with Bernard Sands LLC, in a research note. "The gains are consistent with our view that higher energy costs are not hurting consumer spending to a substantial degree. This is going to hold up through the holiday season."

Among companies,

Wal-Mart

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confirmed that same-store growth missed estimates while simultaneously bumping up its earnings guidance.

The world's largest retail chain reported same-store sales rose 2.8% for the month, missing Wall Street's consensus estimate of 3%, according to Thomson First Call. Net sales rose 10.4% to $21.04 billion.

Wal-Mart predicted November same-store sales growth to be between 2% and 4%, and it said a change in its tax rate would put third-quarter earnings at the high end of its old range of 52 cents to 54 cents a share.

Wal-Mart said sales for its third quarter were below original estimates, but said its gross margin beat forecasts.

Elsewhere,

Costco

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said October same-store sales rose 8%, benefiting from strength in women's clothing and home furnishing products. Its total sales added 11% to $3.79 billion.

Same-store sales gained 6% at

Kohl's

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in October, and the department store chain posted total sales up 14.6% to $958.2 million. Still, it lowered its third-quarter earnings guidance to 41 cents to 42 cents a share, down from the previously announced 41 cents to 44 cents a share. Analysts on Wall Street were expecting earnings of 43 cents a share, according to Thomson First Call.

Sears'

(S) - Get Report

October sales results beat expectations, with a 1.9% gain in same-store sales. Total October sales rose 0.1% to $1.9 billion, showing strength in its home appliance business and weakness in apparel.

Pier 1 Imports

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said its same-store sales dropped 5.9%, disappointing Wall Street analysts who were expecting a smaller decline. The home furnishing retailer's total sales rose 1.4% over October of 2003 to $144.9 million.

Nordstrom

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said its same-store sales rose 11.5%, while net sales at the upscale department store chain rose 13.5% to $511.9 million.

Limited Brands

(LTD)

reported a same-store sales increase of 14% in October, with total sales up 13.9% to $633.8 million.

Talbots'

(TLB)

same-store sales beat expectations, up 4.7%, with sales totaling $146.9 million, up 7% from October of last year. Based on the performance, the specialty retailer and cataloguer said third-quarter earnings would likely reach the high end of its previously announced guidance of 45 cents to 50 cents a share. That still marks a decline from last year's earnings of 60 cents a share.

Pacific Sunwear

(PSUN)

posted a monthly same-store sales gain of 8.5%, reporting total sales of $74.9 million, up 19.6% over the same month last year.

Also,

Sharper Image

(SHRP)

said same-store sales added 1%, while total sales rose 22% to $60.3 million.

"The total company October sales were good, but at the low end of our expectations, due in part to the less-than-desired inventory levels caused by slow processing of merchandise going through the West Coast ports," said the gadget seller in a statement.

Sharper lowered its third-quarter earnings guidance to a net loss of 19 cents to 23 cents a share. Analysts were expecting a loss of only 10 cents a share, according to Thomson First Call.

Late Wednesday,

Hot Topic

(HOTT)

said its same-store sales were lower than expected in October, down 3.8%, while its net sales jumped 10% from last year to $56.2 million. As a result, the company lowered estimates for third-quarter net income to 27 cents a share. Its sales for the quarter rose 12% to $180.7 million.

"We believe that the sales shortfall related specifically to Halloween product does not represent a fundamental shift to our recent core business trend," Betsy McLaughlin, CEO of Hot Topic, said in a statement.

Aeropostale

(ARO)

, a specialty apparel retailer, said its comps increased 9.1% for the month. Net sales increased 28.3% to $72 million, compared to $56.1 million in the same month last year.

"Holiday selling season has been smooth and we continue to believe that we have the right merchandise and powerful promotions to have a successful holiday season," Julian R. Geiger, the company's chairman and CEO, said in a statement.

Based on its performance, Aeropostale boosted its third-quarter guidance to 53 cents or 54 cents a share, which would represent a 43% rise from earnings of 37 cents a share in the same quarter last year. Its previous guidance called for earnings of 51 cents a share, while Wall Street's consensus estimate is for 52 cents a share, according to Thomson First Call.

American Eagle Outfitters

(AEOS)

said October same-store sales rose 31.7%. Total sales rose 39% for the month to $133.6 million.