New York, NY, Nov. 8‹The return of cold weather in October brought consumers back to stores and malls to buy warmer clothes, brightening retailers' prospects for the holiday shopping season. Business was good even at The Gap, which reported its best sales performance in almost three years.
Monthly sales reports showed that discounters and some moderate price stores remained strong. Wal-Mart Stores and Kohl's had figures that exceeded Wall Street expectations.
But The Gap and other mall based apparel stores did well too, halting at least temporarily a prolonged slump. The Gap reported its first gain in sales at stores open at least a year since April 2000. The 11% gain far surpassed the 0.6% increase analysts had predicted.
There were still some pockets of weakness, including department stores and warehouse clubs, particularly Costco Wholesale. The exceptions included J.C. Penney and Nordstrom, both of which reported results that pleased Wall Street.
³Is the retail industry finally on the mend? It appears that tentatively the answer could be yes,² said Michael P. Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd., whose same store sales tally was up 3.1% for the month. Niemira had expected a 2% gain.
³You are starting to see some life in the industry,² he said.
Niemira now believes merchants could have same store sales for the holidays at the high end of his forecast of a 2% to 3.75% gain. Previously, he expected results at the low end of that range.
The better-than-expected results caused a host of retailers, including Penney, Kohl's, Gap, AnnTaylor, Talbots and Federated Department Stores, to upgrade their earnings projections for the third quarter, after many had downgraded their forecasts only a month ago.
One of the most dramatic revisions came from Gap, which said profits will be in the range of $.12 to $.14 a share. Analysts surveyed by Thomson First Call expected $.06 per share.
Analysts expect discounters, particularly Wal-Mart, Kohl's and Target, to have a strong holiday, but department stores will face the biggest challenges.
Wal-Mart posted an October same store sales increase of 3.7%, far better than the 3% gain Wall Street projected. Kohl's said same store sales rose 18.3%, better than the anticipated 5.8%. Target said same store sales increased 1.5%. Wall Street expected a gain of 0.4%.
Among the stores that languished are Sears, which blamed the weak economy for sluggish sales of big ticket items such as home appliances, home electronics and jewelry.
The company, however, was pleased with its apparel business, which experienced ³substantial improvement.² Sears reported a same store sales decline of 10%, much worse than the 6.6% decline Wall Street forecast.
