Retailers hope to find momentum in October sales numbers
Most major national retailers will report October sales numbers Thursday, and they expect to post gains over last year's sales. That's not a major accomplishment, since those gains are compared to the free-fall that we saw last October. Further, consumer confidence figures remain low and unemployment rates high. As anyone who reads the comments on this site can tell, consumers are still not ready to spend freely, no matter how many economists call the end to this recession.
But since retailers have cut costs and trimmed inventory sharply to adjust to last year's debacle, any uptick in sales beyond what they already expect will have an outsize effect on profits. We already saw that last month when many retailers, even while posting losses and lower sales, raised their guidance because the numbers were better than expected.
While "better than expected" was the songbook for back-to-school sales, "momentum" looks like the code word going into the Black Friday sales the day after Thanksgiving. At recent investor meetings and conference calls, retailers have been obsessively dissecting their sales figures week-by-week and month-by-month to show how sales growth has accelerated during the year -- or at least how the year-over-year drops have shrunk progressively.
The International Council of Shopping Centers reported sales figures for the last week of October were up 0.1 percent higher than the week before and 1.9 percent above the same period last year. But while each week of the month has shown a higher growth rate over last year, that 1.9 percent was lower than the 2.4 percent year-over-year growth seen the week before.
The ICSC's chief economist, Michael Niemira, blamed the loss of momentum on warmer, wetter weather around the country. The short summer and early arrival of fall had been helping apparel sales, one segment that had taken an especially severe beating as the recession set in.
But Niemira's report added that sales accelerated going into the Halloween weekend and that, taking the month as a whole, sales grew "reasonably well." The report concluded that the full-month tally ICSC reports Thursday should show sales growth was flat to up around one percent.
A report from Thompson Reuters projected sales will be up 1.2 percent, compared to a drop of 4.1 percent last year. Drugstores are expected to do best, and today's report from Walgreens (WAG) tends to bear that out. The drugstore chain was first out of the gate with its October sales figures, which were up 9.4 percent above last year, beating Wall Street's expectations. No surprise there, though: Health and personal care retailers have been the one segment that's continued to perform well every month this year.
But Reuters warned that any retailers that disappoint Wall Street this month will find it costs them dearly. After building up investors' hopes for a recovery, those companies will be punished just as hard on the downside as they'll be rewarded on the upside.
So perhaps retailers will have to continue managing expectations a while longer, until consumers feel secure enough to shop for anything other than the essentials.