October Sales Slow, but Retailers Discount Effect of Stock Plunge
The nation’s retailers reported that sales were sluggish during October but said warm weather and confusing fashions seemed to have a greater impact on consumers than the stock market’s plunge.
Sales did fall in the wake of the stock market’s historic decline on Oct. 19, they said, but recovered in the final week of October. Sears, the nation’s largest retailer, and Federated Department Stores, the parent of Bullock’s and Bloomingdale’s, blamed the stock market for holding down expected increases in October sales.
Philip M. Hawley, chairman and chief executive of Carter Hawley Hale Stores, owner of the Broadway, said the stock market’s effect on sales was imperceptible.
“I don’t see any signs now that we will now see a big pullback on the part of the consumer,” said Hawley. “We are putting to bed big increases in most areas over last year.”
Overall, the nation’s department stores said sales increased by about 3.5% in October, led by gains in home furnishings and moderately priced women’s clothing. Analysts said sales of big ticket durable goods fell.
Sears’ meager 1% sales increase in October, analysts said, reflects a decision by consumers to postpone purchases of expensive durable goods, such as washing machines, refrigerators and televisions.
It was the third consecutive month of generally soft sales, and industry analysts were already predicting widespread discounting for Christmas.
Despite these general trends, the results by individual retail chains fluctuated greatly. J. C. Penney and K mart reported healthy sales gains, led by strong women’s clothing sales. Sears, known for its appliances, said its sales gained by just 1% in October.
Dayton Hudson, the Minneapolis retailer that operates the Mervyn’s and Target chains, reported higher sales, but said its third-quarter earnings would be “substantially” down from a year earlier because of promotional sales related to new store openings.
Federated Department Stores’ department store sales gained just 1.7%, analysts said, because its upscale customers were most affected by changes in the stock market. Chairman Howard Goldfeder blamed “consumer uncertainty associated with volatility” in the stock market.
Carter Hawley Hale Stores said its sales dropped slightly. In an interview, Hawley said sales fell because the Los Angeles company’s Emporium Capwell unit--based in Northern California--reduced its sale days to five from 11 last October. He said he expected third-quarter earnings to show an improvement over last year.
‘Promotional Environment’
Retail analyst Edward F. Johnson of the Johnson’s Redbook Service in New York said that, in general, retail sales slowed in the week after the Oct. 19 stock market slide.
Johnson said department store sales fell 1% in the last week of October and discount store sales gained by 2%. This compares to department store sales increases of 5% and discount store sales gains of 10% early in October, he added.
Analysts said consumers generally showed a willingness to spend moderately. But Walter F. Loeb, an analyst with Morgan Stanley in New York, said “there is enough uncertainty about what the consumer is likely to do to make retailers very nervous. I am looking for a highly promotional environment at Christmas.”
Johnson noted that other factors overshadowed the impact of the stock market in October. He said unseasonally warm weather in the East and Midwest kept consumers from buying coats, sweaters and other winter clothing. Retailers also complained that with Halloween on a Saturday, many parents took children trick-or-treating instead of shopping, Johnson said.
The confusion in women’s fashion tended to generally depress clothing sales, analysts said. Loeb of Morgan Stanley said women couldn’t chose between short hemlines or long ones and didn’t know whether to favor knit fabrics or silk. Loeb says women’s clothing sales should show some improvement next month, as “it now appears that short hems and the silk fabrics have won.”
The declines reported Thursday were thought to be temporary. Michael Bozic, chairman and chief executive of Sears, said October “closed on a strong note after a softening in sales during the week of Oct. 19.”
MAJOR RETAILERS’ SALES IN OCTOBER
In millions Year % of dollars 1987 ago change Sears 2,335 2,311 +1.0 K mart 1,858 1,741 +6.7 J.C. Penney 1,879 989.0 +9.1 May Dept. Stores 761.6 713.1 + 6.8 Federated* 553.6 544.2 +1.7 Dayton Hudson 809.7 680.8 +18.9 Wal-Mart Stores 1,444 1,833 +40.0 Woolworth** 295.0 269.0 +9.5 Montgomery Ward 344.1 330.9 + 4.0 Carter Hawley Hale 192.4 197.8 - 2.7
* Excludes supermarket sales.
** Excludes foreign sales.
