October retail sales sapped by Wal-Mart

By Abigail Goldman

Nov. 3, 2006 12 AM PT

Times Staff Writer

Consumers restrained their spending in October, but industry analysts said most buyers were probably just pausing before shelling out for holiday outfits, Christmas decorations and hot new toys .

“It’s not an encouraging sign for the consumer, but it doesn’t necessarily destine us to a tough holiday season,” said Matt Fassler, a retail analyst with Goldman Sachs in New York. “We’re still reasonably upbeat about holiday sales.”

Department stores made the best showing last month, as evidenced by retail sales numbers released Thursday. Nordstrom Inc., Saks Inc., J.C. Penney Co. and Federated Department Stores Inc. all posted dramatic annual same-store sales increases.

Big discounters, however, didn’t do as well in comparison with October 2005, which some attributed to strong sales last year after Hurricanes Katrina and Rita.

The world’s largest retailer, Wal-Mart, said its sales rose just 0.5%, dragged down by its namesake stores, which were up 0.3%. Its Sam’s Club warehouse stores gained 2% compared with the same period a year ago.

The Bentonville, Ark.-based company, which has blamed its troubles on remodeling disruptions and tepid interest in its apparel offerings, said sales in November also would be flat with the year-earlier period.

Wal-Mart estimated the overall same-store sales results in its weekly release on Saturday, telegraphing the more detailed disclosure on Thursday. Shares of Wal-Mart fell 56 cents Thursday to $48.29.

Target Corp. and Costco Wholesale Corp. however, slightly outdid some of their peers, posting gains of 3.9% and 4%, respectively, although Costco’s sales came in at the low end of expectations.

Overall, retail sales rose 1.8%, according to a composite index tabulated by investment firm Goldman Sachs, down from a 3.4% gain in September.

The department store sector’s same-store sales climbed 5.7%, trailed by a 1.5% gain for specialty retailers and a 1.3% rise for the discounters, according to Goldman Sachs.

But without Wal-Mart, whose almost 4,000 stores weighed down the retail index, October sales looked much better, said Jharonne Martis of Thomson Financial in New York.

Thomson pegged overall gains in retail sales at 3% for October in stores open at least a year. Excluding Wal-Mart, retail sales gained 4.9%, Martis said.

“It wasn’t that bad at all -- 3% reflects a healthy consumer, so 4.9% is a robust, impressive number,” Martis said.

The International Council of Shopping Centers also pegged the overall expansion last month at 3%.

Market research firm NPD Group said some sales were lost in October because of retailers’ desire to push the holiday selling season ever earlier. By erecting holiday displays in early fall, NPD said, retailers push other merchandise off the floor and out of shoppers’ reach.

That jeopardizes sales volume, according to NPD, because the firm’s surveys show that few consumers are planning to do their holiday shopping earlier than in past years.

Most retailers that reported same-store sales Thursday posted results that were consistent with their performance of recent months.

San Francisco-based Gap Inc.’s catchy new ads featuring old Audrey Hepburn clips failed to win fans for its skinny black pants. The company, which has been struggling with weak sales for two years, said October same-store sales fell 7%.

Sales at Gap’s Old Navy division, the company’s biggest unit, fell 11%. Sales at Gap stores fell 4% in the U.S. and 8% abroad. Only its Banana Republic chain saw a gain, with sales up 2%.

Teen retailers posted mixed results. Thomson’s teen/child index was up 2.8% in October, weighed down by Industry-based Hot Topic Inc., which saw sales fall 7.2% and Anaheim-based Pacific Sunwear of California Inc., which reported a 7.1% decline last month.

Balancing the poor youth performers, Everett, Wash.-based Zumiez Inc. reported a 15.9% sales gain, Gymboree Corp. posted a 10% gain, American Eagle Outfitters reported an 8% rise and Foothill Ranch-based Wet Seal Inc. recorded a 7.5% sales gain in stores open at least a year.

The worst performer in Thomson’s retail index was San Francisco-based Sharper Image Corp. with a 31% sales decline.

Fassler, of Goldman Sachs, said falling gas prices probably would work in retailers’ favor this holiday season, as shoppers find uses for the extra cash. What’s more, he added, the slowdown in home refinancing, which had been a source of funds for many consumers, probably won’t hold back spending until next year.

“October can be a clearance month before the holiday,” Fassler said. “Coming into [October] with clean inventory and consequently delivering modest sales isn’t necessarily such a terrible thing.”

abigail.goldman@latimes.com

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Year-over-year percentage change in October sales at stores open at least a year

Company---% change

Guess: +11.8%

Nordstrom: +10.7%

Limited Brands:+9.0%

J.C. Penney: +8.1%

Federated: +7.7%

Wet Seal: +7.5%

Target: +3.9%

Ross: +3.0%