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Retail Sales Increase 4.1% in October

Times Staff Writer

Retailers reported respectable sales gains in October as people continued to spend more in upscale stores, and industry watchers saw good tidings for the holidays.

The industry overall logged a slightly better-than-expected 4.1% increase in same-store sales, while luxury retailers collectively posted a 9.2% gain over last year, according to a report released Thursday. Seattle-based Nordstrom Inc. and Dallas-based Neiman Marcus Inc. both logged double-digit advances in same-store sales.

“That’s where the action has been,” said Michael Niemira, chief economist for the International Council of Shopping Centers, which compiled the same-store sales results of about 80 retailers nationwide. “That’s where the money is and that’s likely to continue to be one of the strong segments through the holiday season.”

Companies targeting teens and young women racked up some of October’s most impressive advances. Brisbane, Calif.-based Bebe Stores Inc.'s same-store sales jumped 30.6% and American Eagle Outfitters Inc.'s shot up 29.2%. The results pushed Bebe’s stock up $4.41, or 14%, to $36.05; American Eagle Outfitters stock rose $1.20 to $41.36. Both trade on Nasdaq.

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Typically, October is when stores begin to clear out old merchandise, and sales during the month are not a harbinger of November and December revenue.

But the strength of the October gain -- the strongest year-over-year increase since May’s 5.7% rise -- encouraged some retail experts.

“It’s better than I thought it would be,” said Robert Buchanan, an analyst with A.G. Edwards & Sons. “I think consumers are gathering some momentum heading into the holiday” season.

That isn’t to say the experts have changed their forecasts to predict soaring holiday sales. Niemira, for example, figures sales will be 3% to 4% higher than last year. Last year, they rose 4% in November and December, making it the best holiday season for retailers since 1999.

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“It will be a continuation of the improvement that is already at hand in the October report,” he said.

California-based companies posted mixed results for October.

Besides Bebe, Gap Inc. of San Francisco, which operates more than 3,000 Gap, Old Navy and Banana Republic stores, said same-store sales rose 3% with all divisions posting gains except Gap International, which saw sales fall 10%.

Same-store sales are an important indicator of a retailer’s health because they include only stores open a year or more.

Anaheim-based Pacific Sunwear of California Inc. outperformed estimates with an 8.5% increase as teens who like surfing and skateboarding brands shopped at its PacSun stores and youth who favor urban styles gravitated to its d.e.m.o. chain. In Los Angeles, trendy apparel seller Guess Inc. logged a 6.2% increase.

Cash-strapped Wet Seal Inc. continued its downhill trend, reporting that same-store sales from continuing operations declined 15.5% in October and 12.6% in the third quarter.

The Foothill Ranch-based retailer of trendy clothes for teens said Wednesday that it was in talks to raise $40 million from a private investor. The company, which also operates the Arden B chain for young women, is aiming to win back customers and avoid a bankruptcy filing.

In the midst of its struggles, Wet Seal is trying to hang on to its executives. The company will give “one-time retention payments” of $100,000 each to Wet Seal division President Allan Haims, Chief Financial Officer Douglas Felderman and Executive Vice President Joe Deckop, according to a Securities and Exchange Commission filing. Each retention agreement includes a grant of 155,000 shares of the company’s restricted stock and “certain severance protections in the event of an involuntary termination of employment” by the company.

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Wet Seal’s stock price, down 85% this year, dropped 15 cents Thursday to $1.45 on Nasdaq.

Hot Topic Inc.'s stock also dipped Thursday, losing 75 cents to $20.08 on Nasdaq. A day earlier, the teen retailer reported after the market closed that its third-quarter same-store sales fell 4.2% as Halloween revenue dropped 10%. The City of Industry-based firm, which sold “anarchy cheerleader” and “pirate wench” costumes for Halloween, along with gothic get-ups and “naughty nurse” ensembles, said October sales dipped 3.8%.

A report released by Thomson Financial on Thursday said that the presidential election added an element of uncertainty for consumers in October but that pent-up demand from areas hit by hurricanes in September probably helped fuel sales.

Looking ahead, the report said, “With everything from the shaky job market to the high price of oil, there are still worries weighing on the consumer.”

In October, low-income consumers, their wallets pinched by high gas prices, spent warily. Bentonville, Ark.-based Wal-Mart Stores Inc., a favorite of these shoppers, reported a comparable-store sales increase of 2.8%, slightly less than expected.

Shoppers who were looking to save money and could afford to pay membership fees sent wholesale clubs’ sales up 6.6%. Wal-Mart’s Sam’s Club division posted a 5.0% gain, while Costco Wholesale Corp. in Issaquah, Wash., gained a better than predicted 8%. Department stores advanced 2.3%.

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(BEGIN TEXT OF INFOBOX)

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October sales

Percentage change from a year earlier in October sales at stores open at least one year

*--* Company % change Bebe +30.6% Limited Brands +14.0 Nordstrom +11.5 Pacific Sunwear +8.5 Guess +6.2 Target +6.0 Federated +4.0 Ross +4.0 Gap +3.0 Wal-Mart +2.8 J.C. Penney +2.1 Sears +1.9 Gottschalks -1.9 May -2.3 Hot Topic -3.8 Wet Seal -15.5

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Sources: Times wire services, company reports


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