October sales promise a bit of relief to stores
AP Retail Writer
NEW YORK – The early picture of October retail sales shows more signs of a spending recovery, lifting hopes for a slightly merrier holiday season and for the overall economy.
The brighter outlook among analysts comes ahead of Thursday’s sales reports from major retailers, which are expected to show the second consecutive monthly gain after more than a year of declines.
Shoppers are treating themselves to little indulgences like boots and purchasing some merchandise at full price.
SpendingPulse, a service of MasterCard Advisors, reported Wednesday that jewelry (up 7.2 percent) and clothing (up 3.4 percent) showed signs of life in October compared with a year earlier, when spending was in a free fall. But those figures were well below the levels two years ago and only slightly better than 2005. SpendingPulse estimates sales in all payment forms including cash and checks.
A flurry of apparel retailers from T.J. Maxx to J. Crew Group Inc. have raised their profit outlooks in recent weeks.
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Consumer spending accounts for about 70 percent of all economic activity by federal measures, so evidence that consumers are opening their wallets a little more could provide incentive for factories to step up production of goods.
Signs of life in spending “should offer evidence that these businesses need to start boosting their investment to feed this return of consumer demand,” said Frank Badillo, senior economist at consulting group TNS Retail Forward.
Cooler weather helped October sales of plaid shirts and leggings. Ken Perkins, president of retail research firm Retail Metrics, said early holiday discounts also may have drawn shoppers last month.
There’s concern about the fragility of American consumers who continue to grapple with tight credit and weak employment. More than 6 million additional people were jobless in September 2009 than in September 2008.
As a result, consumer confidence has been choppy in recent months, rising above its February low, but still far from levels that would mean the economy is on solid footing.
Michael P. Niemira, chief economist at the International Council of Shopping Centers, expects its analysis of October retail sales to show at least a 1 percent gain. The figures are based on sales at stores open at least a year and are considered a key indicator of a retailer’s health. That estimate compares with a 4.2 percent decline in October 2008.
The figures exclude Wal-Mart Stores Inc., which stopped reporting monthly sales after reporting April results.
Retail Metrics’ Perkins raised his projection to a 2 percent gain, up from 1.4 percent earlier in the month, helped by improving business at department stores. Unlike ICSC-Goldman Sachs tally, Perkins’ roster excludes privately held companies. That compares with a 3.5 percent decline from a year ago.
Any sales momentum would raise hope for the holiday shopping season. Stores are entering the season with leaner inventories from a year ago, and are offering targeted discounts. That’s a big difference from the scenario that stores found themselves in last year when they were discounting piles of holiday inventory stuck in the pipelines after consumers went into hibernation.
Still, many companies are also maintaining a conservative stance.
Roger Farah, chief operating officer at Polo Ralph Lauren, said he’s encouraged by signs that “those that have money are beginning to spend … again.” But sales remain at “depressed levels,” so the company is being cautious with inventory. Like many companies, it would rather scramble to restock items that sell out than be stuck with lots of leftovers.
AP Business Writer Christopher S. Rugaber contributed to this report in Washington.