Weather, Fires Temper Retail Sales Growth

Times Staff Writer

Sales at U.S. chain stores advanced at a slower pace in October than in the prior three months as warm weather made fall clothes unappealing and wildfires reduced demand in California.

Shopping could tick up again this month and next, economists said Thursday, citing government reports that jobless claims fell last week and productivity surged in the third quarter.

"We went through very strong months July through September, and we will probably revisit that strength in November and December," said Mike Niemira, a senior economist for Bank of Tokyo-Mitsubishi.

In fact, accounting firm Deloitte said its index tracking consumers' cash flow as an indicator of their future spending showed a strong 4.5% gain last month, up from a revised gain of 4.2% in September. Carl Steidtmann, Deloitte Research's chief economist, said it was part of a "trend that has been going on and is on track to continue into the spring of 2004."

Same-store sales, a key barometer for retailers, advanced 3.2% in October, after a robust September during which they gained 5.9%, according to Bank of Tokyo-Mitsubishi's tally of 74 U.S. chain-store operators.

In stores, however, people sounded generally cautious.

Fatima Pleasant, a 25-year-old social worker who lives in Culver City, said the wildfires made her more interested in shoring up her insurance coverage than in shopping for Christmas presents. So, she said, she would spend less than the $1,500 she had doled out for the holidays last year.

"I think, right now, what I need to do is get my life secure," she said after stopping at Nordstrom at Los Cerritos Mall, where she picked up a pair of shoes on sale. "I want to make sure I have medical, life insurance, property insurance and car insurance. A lot of people lost a lot of things" in the fires.

Cynthia Saunders, a 49-year-old school bus driver who was shopping at Wal-Mart in Long Beach on Wednesday, said the world was too unsettled for her to feel comfortable spending much on Christmas gifts.

"I try to not spend a lot and to get a lot for the money," she said.

During October, many consumers adhered to that practice.

Department stores, which as a group have been struggling for years, continued to slog along, with their same-store sales sliding 3.3% for the month. Same-stores sales are an important indicator of a retailer's health because they include only stores open at least a year.

Specialty apparel stores, which reported showy sales growth in September, dipped 1.2% as a group last month, although some California companies filed upbeat reports.

At City of Industry-based Hot Topic Inc., a music-themed apparel and accessories retailer catering to teens, Halloween is second only to Christmas in importance, and the company said same-store sales jumped 11.2% in October from the same month last year.

Anaheim-based Pacific Sunwear of California Inc. posted a 4.6% gain, as its d.e.m.o. chain continued to attract youth who like clothes inspired by hip-hop. Still, its overall gain was less impressive than in previous months, and investors shaved almost 5% off the price of PacSun's stock. It closed at $21.95, down $1.08, in Nasdaq trading.

Gap Inc., the nation's largest specialty apparel chain, faced tougher comparisons in October than it has over the last year but still managed to eke out a 1% overall same-store sales gain; for Banana Republic, same-store sales were up 11%, and for Old Navy they were down 4%.

The San Francisco-based retailer said Thursday that it expected third-quarter earnings of 26 cents to 28 cents a share, compared with 15 cents a share in the prior year. A consensus of analysts from Thomson First Call expected earnings of 23 cents. Gap's stock jumped 8.4% to $20.28, up $1.57, on the New York Stock Exchange.

Wet Seal Inc., which operates the Wet Seal, Arden B. and Zutopia chains, struck another sour note in October. The Foothill Ranch-based retailer of trendy clothes for girls and young women saw same-store sales drop 9.7% for the month and 10.2% for the third quarter, as it slashed prices on back-to-school apparel to unload merchandise in its Wet Seal stores.

Warehouse stores such as Costco Wholesale Corp. of Issaquah, Wash., were the only retail category that logged a standout month. Collectively, their sales advanced 9.3%.

"That segment really was an offset to some of the weather-related weakness," Niemira said.

Sales also were relatively soft for discounters.

Wal-Mart Stores Inc., the world's largest retailer and parent of Sam's Club warehouse stores, reported overall same-store sales gains of 4.5%. At Target Corp., they were up a weaker than expected 1.6% as its Hayward, Calif.-based Mervyn's chain logged its 25th consecutive month of declining sales, dropping 15.1%. At Target stores, sales rose 4.5%.

Department stores struggled on a variety of fronts last month.

Federated Department Stores Inc., parent of the Macy's and Bloomingdale's chains, blamed weather, wildfires and the Southern California transit strike for keeping shoppers out of stores and driving its same-store sales down 2% in the month. About 20% of its stores are in California.

The fires also hurt apparel sales for Sears, Roebuck & Co., based in Hoffman Estates, Ill., but that was partially offset by a rise in the sale of items used to clean up or make repairs, such as wood chippers, rakes and flashlights, spokesman Ted McDougal said. The fire effect was not material, he said, as comparable-store sales declined 2.7%.

Off-price retailer Ross Stores Inc. of Newark, Calif., said its 2% same-store sales drop was partly due to the blazes that raced through the Southland, where about 100 of Ross' 573 stores are located.

But the fires fanned sales at Sharper Image Corp. in San Francisco, which saw purchases of its air purifiers surge as smoke dimmed the sun and ash fell like snow. With October comparable-store sales up 12%, the retailer boosted its per-share earnings expectations slightly for the quarter and the year.

May Department Stores Co., parent of Robinsons-May and other chains, posted same-store sales declines of 4.2% for the month. The Robinsons-May in Cerritos was cheerily decorated this week with Christmas trees and overhead signs that read "Give the greatest gifts!"

Other signs were of more interest to Clara Gallardo, 52, who keyed in on a $34 sweater marked down to $19.99.

"Always, I'm looking for the sales," said Gallardo, who handles community relations for a group of doctors. The Azusa resident said she expected to spend about $500 on Christmas gifts, about the same as last year.

Nearby, Artesia resident Myrna Lawrence, a nursing assistant, also was searching for bargains.

"I don't want to spend too much money now," said Lawrence, 57, showing off a flier filled with coupons that would get her an extra 15% off merchandise that already was marked down 30%. "You have to take advantage of things like that."

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