Sales growth slowed in Oct.

Halloween goods and fall fashions lead spending

November 05, 1999|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Sales at the nation's biggest retail chains grew more slowly in October than they have for much of the year, but most retailers had a stronger-than-expected month.

Fall fashions drove consumer spending at specialty apparel stores, while discount stores benefited from record $5 billion spending on Halloween goods, analysts said.

The slower pace was most pronounced for department stores, in part because unseasonably warm weather around the country dampened sales of outerwear and cold-weather apparel.

Sales rose an average of 5.6 percent, more than the expected 5 percent, according to the Bank of Tokyo-Mitsubishi Ltd.'s index of 73 national chains.

Another measure, the Bloomberg Composite Same Store Sales Index, showed overall sales up 5.37 percent, with average gains of 2.29 percent for department stores, 5.55 percent for discount stores, 5.15 percent for specialty apparel stores and 9.97 percent for warehouse clubs.

"A lot of people are talking doomsday about consumer spending, but things seem fine to me," said Kelly Armstrong, a retail analyst with First Union Capital Markets in Richmond, Va. "The results have been at or above expectations for the majority of retailers. We're not seeing a significant slowdown in the tempo of the business."

The stock prices of several women's apparel retailers rose on reports of solid sales, among them AnnTaylor Stores Corp. and Talbots Inc. Limited Inc. reported an 8 percent increase in sales, while Talbots' sales rose 11.6 percent. AnnTaylor said its fiscal third-quarter earnings will exceed analysts' expectations, as demand for the stores' fall clothes and a successful promotion sent sales soaring 11.2 percent.

"Apparel sales are being driven by fashion and fashion-plated items this fall," said Rick Snyder, vice president of Morgan Keegan & Co. in Memphis. "Last year was a huge basics year, but fashion, fashion, fashion is driving sales."

Specialty stores that feature more basic items over fashion items, such as Gap Inc. and its lower-price division, Old Navy, did not fare as well. With lower-than-expected sales at Old Navy, sales at Gap Inc., the second-largest U.S. clothing chain, reported that its sales rose only 1 percent. Analysts pointed out that Gap's sales were measured against a steep increase in sales last fall that was difficult to beat.

The mass discounters, including Wal-Mart Stores Inc. and Target, continued the trend of solid sales increases, reporting gains of 6.5 percent and 5.4 percent, respectively.

Other retailers that surprised analysts with especially strong numbers were Sears, Roebuck and Co., which has been on the rebound with a new marketing strategy and an October sales increase of 4.7 percent, and Neiman Marcus Group Inc., with a 9.4 percent increase.

"Americans are very clearly continuing their shopping spree, propelled by a very strong economy" and relatively low unemployment, said Kurt Barnard, president of Barnard's Retail Trend Report of Upper Montclair, N.J. "It tells us the holiday season will be the way we've anticipated: very robust."

Retailers typically consider October a time for clearance, after the back-to-school season but before the crucial holiday selling season. "If comparable [sales] are less than planned, retailers want to have it in the months when they're clearing merchandise," Snyder said.

J. C. Penney Co., which has been struggling, reported that its sales drooped 5.7 percent. The May Department Stores also had a weak month, with sales down 2 percent compared with those in October last year. Those retailers' performances reflected problems in the companies, analysts said.

But, on average, sales increases for October were not as robust, compared with most other months this year, analysts said. The 5.6 percent average sales increase reported by the Bank of Tokyo is the slowest growth since April, when sales rose 4.4 percent.

"The economic fundamentals have weakened relative to earlier in the year, as interest rates and credit use have increased and weekly earnings have risen much more slowly compared with a year ago," said Michael P. Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd.

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