Retailers’ October Sales Top Estimates

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A customer shops at a Target Corp. store at the Westfield North County mall in Escondido, California. Close

A customer shops at a Target Corp. store at the Westfield North County mall in Escondido, California.

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Photographer: Sam Hodgson/Bloomberg

A customer shops at a Target Corp. store at the Westfield North County mall in Escondido, California.

U.S. retailers posted October same-store sales that topped analysts’ estimates as rising home values and consumer confidence boosted spending. Gap Inc. (GPS) and Target Corp. (TGT) were among chains that trailed projections.

Macy’s Inc. (M), the second-biggest U.S. department-store chain, said same-store sales increased 4.1 percent, topping the 4 percent average estimate of analysts surveyed by researcher Retail Metrics Inc. Kohl’s Corp.’s (KSS) same-store sales rose 3.3 percent, beating estimates for a 0.8 percent gain.

Confidence among U.S. consumers climbed in October to a five-year high as unemployment declined and property values rose. Cool weather, strong traffic and Columbus Day weekend promotions drove a “good start” to the month, Randal Konik, an analyst at Jefferies Group Inc., wrote yesterday.

Specialty retail stocks are likely to rise during the holiday season amid “leaner inventories, improving consumer sentiment and expectations that are still too low,” Konik, who’s based in New York, said in a note.

Macy’s, based in Cincinnati, said comparable-store sales in the second half of the year will gain about 4 percent, up from a previous estimate of about 3.7 percent. The shares rose 6.4 percent to $40.52 at the close in New York. Kohl’s, based in Menomonee Falls, Wisconsin, added 3.2 percent to $54.99.

Beating Estimates

Same-store sales for the more than 20 companies tracked by Swampscott, Massachusetts-based Retail Metrics rose 5 percent, excluding drugstores, beating estimates for a 4.6 percent gain, the firm said in a report today. That follows a 3.9 percent increase in September. Most chains count locations open at least a year to tabulate same-store sales. The revenue is a key indicator of a retailer’s growth because new and closed sites are excluded.

Some chains missed the lift. Retailing has been “stuck a little bit” because of the uncertainty around the U.S. presidential election on Nov. 6, Les Wexner, chief executive officer of Limited Brands Inc., said in a presentation to investors on Oct. 17. Customers will resume regular habits after it’s over, he said.

Retailers may also adjust their behavior after the election by spending more on advertisements, said Tom Clarke, a Detroit-based director in the retail practice at consulting firm AlixPartners.

“Normally you see retailers on TV, in print, putting some dollars into the early part of the holiday season, but there are still so many dollars going towards the election and driving the advertising from an electoral spend, I think it’s hard to really make a strong presence,” Clarke said in a telephone interview. “You may see some retailers shifting their spend.”

Target, Gap

Target, the second-biggest U.S. discount retailer, posted a 2.4 percent increase in same-store sales, missing the 2.9 percent estimate.

Gap, the biggest U.S. specialty-apparel retailer, said sales rose 4 percent, falling short of the average projection for a 5.6 percent gain. The company, based in San Francisco, said third-quarter profit may rise to as much as 63 cents a share, topping analysts’ estimates for 54 cents a share, according to data compiled by Bloomberg. Gap North America’s same-store sales for the month gained 6 percent while the company’s comparable-store sales declined 2 percent overseas.

Gap fell 0.2 percent to $35.65 while Minneapolis-based Target slid 1.3 percent to $62.94.

Limited Brands, the owner of the Victoria’s Secret and Bath & Body Works chains, reported October same-store sales that rose 3 percent, trailing analysts’ estimates for a 5.6 percent gain.

The company, based in Columbus, Ohio, said third-quarter profit may be as much as 25 cents a share, up from an August forecast of a maximum of 20 cents. The stock fell 0.7 percent to $47.57.

Zumiez Tumbles

Teen retailer Zumiez Inc. (ZUMZ) reported yesterday that October same-store sales rose 0.6 percent, trailing estimates for 4.4 percent, and lowered its third-quarter profit forecast amid challenges in Europe. The stock slid 17 percent to $21.13, the biggest one-day drop since Aug. 4, 2011.

Hurricane Sandy led to a two-day shutdown for U.S. stock trading and may have caused more than $20 billion of economic damage. The storm’s effects on retailers won’t be significant because most of its damage occurred on a Monday and a Tuesday instead of the weekend, and it was well before Black Friday and the start of holiday shopping, Jennifer Davis, an analyst with Lazard Capital Markets in New York, said in a telephone interview before the report.

Colder Weather

Retailers will stand to gain once the weather gets colder, she said.

“It hasn’t been cold enough to spur heavy winter coats and heavy sweaters, but it’s been cold enough to spur fall merchandise, like lighter-weight sweaters, denim,” she said.

Specialty retailers’ sales relative to analysts’ expectations may have been limited by “clean inventory, a lack of heavy clearance, election distraction, and lack of reason to buy until Black Friday,” Adrienne Tennant, an analyst at Janney Montgomery Scott LLC in Washington, wrote in a note today. Still, October is the smallest sales contributor for retailers’ third quarter and a clearance month as stores make way for holiday merchandise, she wrote.

The month “typically has little ability to change the fate of a company’s third-quarter performance,” she wrote.

To contact the reporter on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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