An October Lift for Retailers, but Storm’s Effects Will Come Next Month

Results tallied Thursday from the 18 national retailers tracked by Thomson Reuters showed an average increase of 2.7 percent in sales at stores open at least a year. The results largely excluded the effects of the hurricane.

Without the Rite Aid drugstore chain, though, that figure would have been 4.7 percent, above analysts’ expectations of a 4.3 percent increase. Rite Aid saw a decline mainly because of a shift toward cheaper generic drugs.

“You’re seeing solid single-digit numbers not just one month but consistently for the past few months,” said Madison Riley, managing director at the retail consulting firm Kurt Salmon. “It reflects a steadily improving economy and therefore, steadily improving consumer confidence.”

Still, all retailers’ eyes were on the impact of Hurricane Sandy. Most retailers’ fiscal October ended on Saturday, so while a few stock-up trips made it into the October results, most of those, along with poststorm spending and the impact of store closures, were not included in October results.

Some analysts have said that consumers may direct their money toward home repairs in the storm’s wake, rather than toward early holiday shopping. However, home improvement retailers and discounters might benefit from shopping for storm supplies.

Categories as various as department stores, discounters and apparel retailers all posted good results. “What I find intriguing and encouraging is it’s not isolated,” Mr. Riley said, “but it’s across the industry.”

Stores for those on a budget continued to shine, like Costco, with a 7 percent increase, and the Nordstrom Rack division of Nordstrom, which posted its highest same-store sales increase of the year. The Rack’s same-store sales rose 10.5 percent, while Nordstrom over all posted a 9.8 percent increase.

Kohl’s, which had been struggling to meet analysts’ sales expectations this year, surpassed them on Thursday, with sales increasing 3.3 percent, versus analysts’ estimates of a 1.1 percent gain. The company said sales of children’s merchandise were stronger than everything else.

Macy’s also exceeded analysts’ expectations, with a 4.1 percent increase versus the 3.1 percent analysts had projected. The company raised its same-store sales guidance for the second half of this year to about 4 percent, up from 3.7 percent, despite the storm’s impact. Macy’s noted that about 200 Macy’s and Bloomingdale’s stores had to close anywhere from a few hours to multiple days as a result of the storm, but added that “the company is confident that it can make up some or most of the lost sales through the remainder of the quarter.”

Target had a rare miss, with a 2.4 percent increase versus the 3.2 percent analysts had expected. The company did not give a clear reason for the results, saying in a release that they were “near the low end of our expected range.”

The biggest decline came from the teenage-apparel retailer Wet Seal, which was troubled by management churn and sliding sales. Same-store sales declined 7.6 percent, which was actually less steep than the 10.5 percent drop that analysts had expected.

Same-store sales at Rite Aid dropped 1.1 percent, largely because customers chose cheaper generic prescriptions over name-brand ones. (Walgreens, the other drugstore chain reporting monthly same-store sales, will do so next week.)

Retail analysts were already looking ahead to the storm’s effect on November sales. A Citi analyst, Deborah Weinswig, wrote in a research note that discounters could see a slight lift as people restocked supplies after the storm. But department stores that depend on New York City will be hit, she said — she estimated that Saks derives 22 percent of sales from its Manhattan flagship, and Macy’s gets 8 percent of sales from its New York City-area stores. Ms. Weinswig wrote that “the cost of cleanup and repairs from the hurricane could take money away from holiday purchases, which puts early holiday sales at risk.”

But Mr. Riley, the retail consultant, said the storm had arrived early enough to give people plenty of time to shop for holiday items. “It’s a timing issue, as opposed to ‘It’s going to affect the holiday season,’ ” he said.

Article source: http://www.nytimes.com/2012/11/02/business/economy/retailers-report-an-upbeat-october.html?partner=rss&emc=rss