SAN FRANCISCO -- Retailers catering to both ends of the income spectrum are feeling the squeeze. With discount chain Target ( TGT)
lowering its monthly sales forecast for October and upscale brand Coach ( COH) providing a conservative outlook for its holiday sales, it seems no one is protected from a weak retail environment. Both retailers have been viewed as strong, high-growth outperformers with infrequent sales missteps. "Makes you wonder how significant this consumer slowdown has been," says Ken Perkins, president of the research firm Retail Metrics. For the second month in a row, Target reduced its expectations for same-store sales, or sales at stores open at least a year. It now sees same-store sales in October growing 2% to 4%, down from its forecast of 3% to 5% given just a week and a half ago. Coach, which reported solid results for its recently ended first quarter, nonetheless cautioned that its U.S. holiday sales may see a slowdown from last year. It predicts a same-store sales rise in the low single digits for its North American retail sales, though it expects its outlet stores will grow at least in the mid-teens. The news sent Coach's stock tumbling 12% on Tuesday. It also raised concerns whether the luxury market, viewed as insulated from economic pressures, may now be feeling some pain. Perkins says that Target may be seeing a continuation of warm weather in October that hurt many apparel retailers in September because they were unable to clear out their fall merchandise.
"The weather has really been abnormally warm in September and October," Perkins says. "Nobody's interested in buying fall or winter apparel. Apparel isn't a big issue with Target, but it's probably having an effect as well." Still, Perkins says he is surprised by Target's lowered forecast, especially since the chain has been such a stellar performer. The same holds true for Coach, which has also posted healthy numbers, but Perkins notes that the luxury sector overall may be heading for a slowdown. In September, department store chain Nordstrom ( JWN) missed same-store sales expectations and also cut its earnings guidance. The company said that its sales did not meet its plans, which consequently led to higher inventory levels. Fellow high-end seller Saks ( SKS) also fell short of expectations in September. It posted a 7.7% rise in same-store sales but missed analysts' target for a 9% increase. "It is interesting to see if this whole situation -- with the credit crunch, the housing slump -- will be felt on the high end as well," Perkins says. He adds that with warm weather stretching through October, other retailers besides Target might also revise their forecasts for the month.