Majestic Research

The Washington Post

Retailers post best month since July '08

By Ylan Q. Mui
Published: November 06, 2009

Discount stores did well in October, but some chains struggled

The retail industry posted solid sales increases last month compared with the previous year, according to data released Thursday, but performance among chain stores was uneven as shoppers become increasingly picky about where they spend their money.

Long-struggling Gap reported that October sales at established stores—a key measure of health known as same-store sales—jumped a surprising 4 percent compared with October 2008, when sales plunged 16 percent.

But several teen retailers suffered slumps. Same-store sales at Abercrombie & Fitch fell 15 percent in October, while they dropped 5 percent at American Eagle Outfitters. Luxury department stores fared better than expected, but J.C. Penney’s sales declined 4.5 percent and Dillard’s plummeted 8 percent.

About 30 national retailers reported monthly sales results on Thursday. The International Council of Shopping Centers, a trade group, estimated that sales across those retailers spiked 2.1 percent in October, the biggest monthly increase since July 2008.

“Further evidence of a retail recovery continues to unfold,” said Michael P. Niemira, chief economist of ICSC.

According to the ICSC’s analysis, October marks the second consecutive month that same-store sales have increased since the financial crisis gripped the nation last fall. Consumer spending has been volatile as shoppers take heart in the improving stock market and stimulus programs such as “Cash for Clunkers” but remain concerned that they will get swept up in the rising tide of unemployment.

"It’s not the same degree of fear that we saw last year,” said Chandi Neubauer, an analyst with Majestic Research. “There’s a reasonable amount of stability.”

Economists are closely watching retailers’ results as they gear up for the critical holiday shopping season, which accounts for roughly 40 percent of annual sales. Because consumer spending drives the national economy, many experts believe that a sustainable recovery is not possible until shoppers are ready to open their wallets.

In October, wholesale clubs and discount stores continued to be the big winners. Costco reported that same-store sales jumped 5 percent compared with October last year. For TJX, which owns TJ Maxx and Marshalls, sales spiked 10 percent. And though Target’s sales dipped 0.1 percent, the cheap chic retailer’s chief executive said apparel sales were strong and the performance beat expectations.

In addition, luxury department stores enjoyed the first same-store sales increase since May 2008, according to the ICSC. Saks eked out a 0.7 percent gain, while Nordstrom boasted a 6.5 percent increase. But rival Neiman Marcus continued to post declines, falling 6 percent in October.

The results have led to restrained optimism among some industry experts that the holiday season may be merrier than expected. But don’t expect shoppers to abandon their hard-earned lessons in frugality even if the economy starts picking up, said Frank Badillo, senior economist at consulting firm Retail Forward.

About 45 percent of shoppers said they plan to spend less this holiday, according to the firm’s research. That’s less than the 50 percent who planned to scale back last year, but still a significant number, Badillo said.

“Households remain focused on shopping for needs, and this kind of cautious shopping behavior will restrain the sales improvement we can expect in the coming months,” he said.