Stores Report October Slump in Sales : Retailing: Downturn raises concerns about outlook for holiday shopping season.
Most of the nation’s largest retailers reported bleak sales for October as warm weather, ballooning personal debt and job insecurity led consumers to keep a tight grip on their wallets.
The results prompted analysts to worry about a not-so-merry holiday shopping season. But analysts say California retailers can still look forward to jingling cash registers.
“What you see is that retail sales in California and Southern California have actually been doing fairly well,” said Jack Kyser, chief economist at the Economic Development Corp. of Los Angeles County. “I think we’ll have a fairly decent holiday season in California.”
Kyser said Federated Department Stores’ pending acquisition of Los Angeles-based Broadway Stores is a good sign for the state’s retail outlook.
“These are both very astute retailers; it’s a pretty good vote of confidence in the California retail market,” Kyser said.
He said California is doing better in part because the state economy began its economic recovery later than the rest of the nation. Another good sign, he said, is the state’s fairly strong job growth.
But the outlook for the nation as a whole is not as bright. Retail analyst Kurt Barnard said the sales figures are the most dismal he has seen in years.
“Americans don’t have enough discretionary spending dollars to go on buying sprees,” Barnard said. “We are dealing with a household in America today that is far more in a mood to save than to spend.”
Warm weather, analysts say, may have discouraged consumers from buying winter clothing. But Barnard said that is only a minor factor leading to weak sales.
Americans “are beset by insecurity in terms of jobs and they are deep, deep in debt and very, very hard at work trying to work down that debt,” said Barnard, president of Retail Marketing Report. “Americans have been very plastic-happy, but finally the time has come when the piper must be paid.”
Among factors contributing to consumers’ worries: Wages and benefits for the nation’s workers increased only 2.7% in the past year, the smallest yearly gain on record. Also, consumer installment debt has reached nearly $1 trillion.
While apparel-based retailers showed tepid growth, sales of computers and electronics were brisk. For instance, Best Buy had a 13% sales increase for October.
Analysts say the dismal performance is a sign that retailers can expect further disappointment during the holiday season.
“This is unfortunately an omen of a very weak holiday season to come,” said Alan Millstein, editor and publisher of the Fashion Network Report, a retail newsletter. “Based upon the October performance, they’ll be thrilled if they are 3% to 5% ahead of last year.”
Broadway Stores and J.C. Penney had a decrease in same-store sales--revenue from stores open at least 12 months. Broadway had a 10.1% decrease in same-store sales. At J.C. Penney, sales decreased 8.3%. Sears Roebuck, on the other hand, reported a modest increase of 4.6%. Same-store sales figures exclude newly opened stores in order to provide a more accurate comparison.
Discount stores also showed moderate sales in October. Dayton Hudson led the group, with its Target chain reporting an increase of 5.1% and Mervyn’s an increase of 7.1%. Kmart reported an increase of 4% and Wal-Mart reported an increase of 2.6%.
Specialty clothing stores also had moderate sales. The Limited had a decrease of 5% in same-store sales, while the Gap increased 2%.
Despite the gloomy reports, retail stocks rose Thursday as investors appeared to bet that results will improve soon. Dayton Hudson shares soared $5.25 to $73.875. Nordstrom added $1.25 to $39.50 and Toys R Us jumped $1.75 to $23.875. All trade on the New York Stock Exchange.
