October Sales Slow, but Analysts Still Expecting Robust Holidays

By ABIGAIL GOLDMAN

Nov. 5, 1999 12 AM PT

TIMES STAFF WRITER

Retail sales in October slowed a bit from the first part of the year’s stellar performance, but the figures released Thursday didn’t derail prospects for a strong holiday season, analysts said.

Slower wage growth and unseasonably warm weather hurt sales in October, traditionally a lackluster month as it falls between the back-to-school and holiday selling seasons, analysts said.

Investment bank Goldman Sachs pegged October’s overall retail sales composite at 3.6% higher than the same period last year. Bank of Tokyo-Mitsubishi, which said the slowdown hit department store clothing the hardest, tallied growth at 5.6% in stores open at least a year.

“We’re not saying October’s deceleration marks the beginning of a sharp slowdown,” said Matt Fassler, a Goldman retail analyst. “Slower growth in hourly wages has suggested that we have been due for moderation for some time.”

Results were mixed across the retail sector with surprises both positive and negative.

Struggling Sears, Roebuck & Co. stores posted a healthier-than-expected 4.7% gain in stores open at least a year--its best month since May 1998, a result of heavy promotion in Sears’ strong-selling appliance division early in the month, analysts said.

Gap Stores, with a same-store sales decline of between 4% and 7%, according to Goldman Sachs, dragged down its corporate parent’s overall sales growth to 1%, in spite of continued strong sales at Gap Inc.’s Banana Republic and Old Navy stores.

Analysts said, however, that Gap Stores management seems to be improving a product mix that had been too youthful; Old Navy, meanwhile, which gets new products every month, was working to correct a less-than-popular color palette of bright fall shades, such as orange.

October also saw waning sales for powerful Wal-Mart, the nation’s largest retailer. Although the giant discounter experienced same-store sales growth better than most, at 6.2%, the gain is still less than the phenomenal rate to which the chain has become accustomed--and the lowest since 4.6% in April, when the shift of Easter’s date is believed to have negatively affected almost all retailers.

Because of its size, Wal-Mart’s results have a big impact on the overall retail sales composite. But perhaps more importantly, analysts said, Wal-Mart’s size and position as discounter to the masses means economic trends affect it first. Analysts said that rising interest rates could further slow the pace of retail sales.

Same-store sales are considered among the best measures of retail performance because the measure compares like time periods year over year and excludes new and closed stores.

Analysts said each retail sector had its share of winners and losers, with few signs of broader trouble.

Goldman Sachs, for example, measured department store sales at just 1.2% higher than last October. But standout Federated Department Stores Inc., parent of Bloomingdale’s and Macy’s among others, reported sales up 5.3%--a strong number for a generally slow retail area. Nieman-Marcus Group Inc. likewise had a strong month, up 9.4%.

May Department Stores Inc. however, fell 2%; analysts said they were uncertain about the shift from a generally strong performer.

Women’s specialty apparel companies, however, posted strong gains. Ann Taylor reported sales up 11.2% as compared to last October’s sales. Limited Inc., parent of Express, Limited, Lane Bryant and others, saw sales gain 8%. Intimate Brands Inc., of which Limited is a majority shareholder, posted 11% gains and Talbots reported sales growth of 11.6%

Costco Inc. soared even where discounter Target and Wal-Mart’s Sam’s Clubs did not, with Costco posting a 14% gain for October, while Dayton Hudson’s Target had just a 5.4% rise and Sam’s rose 4.9%. With Dayton’s Mervyn’s California department stores down 6.7%, Target was unable to lift total Dayton sales as it has in previous months; Dayton Hudson reported overall sales in stores open at least a year down 1.4%.

J.C. Penney Co. stores also suffered yet another month of flat or falling numbers, with sales off by 6.7% in stores open at least a year.

Circuit City Group reported an 8% gain, mostly because of strong sales in personal computers and DVDs.

Toys R Us, down significantly because of tough competition from discounters and e-tailers, was likely to show strong third-quarter sales because of popular Pokemon products, analysts said.

“I think we are likely to have a good Christmas. I expect the pace during November and December will not be as strong as last year, but will be as good as two years ago,” said Michael Niemira, a retail analyst with Tokyo-Mitsubishi. “I’m more concerned about after the turn of the year.”

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Retail Sales

A look at the percentage change of some major retailers’ sales from October 1998:

Limited Inc.: +8.0%

Wal-Mart Stores: +6.2

Federated Dept. Stores: +5.3

Sears, Roebuck & Co.: +4.7

Saks: +4.0

TJX Cos.: +4.0

Kmart: +3.7

Dayton Hudson: +2.9

Dillard’s: +2.0