October mass market retail sales were less than stellar, even though results did not, for the most part, reflect any major impact from Hurricane Sandy. Department stores, on the other hand, outperformed analysts’ expectations.


October, mass market retail sales, Hurricane Sandy, Conference Boardís Consumer Confidence Index, Target Corp., Thomson Reuters, Gregg Steinhafel, Costco Wholesale Corp., Costco, Fredís Inc., Bruce Efird, Alco Stores Inc., Rich Wilson, Walgreen Co., Rite Aid Corp.






















































































































































































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Inside This Issue - News

Mass chains eke out monthly sales gains

November 12th, 2012

NEW YORK – October mass market retail sales were less than stellar, even though results did not, for the most part, reflect any major impact from Hurricane Sandy. Department stores, on the other hand, outperformed analysts’ expectations.

Prestige retail may have benefited more than the mass market from an increase in the Conference Board’s Consumer Confidence Index during October. It was the second consecutive monthly increase in the measure.

The survey showed that those claiming business conditions are “good” jumped to 16.5% from 15.3%, while the percentage of those judging conditions as bad edged down to 33.1% — still a third of those polled — from 33.8%.

At Target Corp. total sales rose 3% to $4.98 billion during the four weeks ended October 27, while comparable-store sales gained 2.4%, well short of the 3.3% increase projected by analysts surveyed by Thomson Reuters. Nonetheless, chairman, president and chief executive officer Gregg Steinhafel was upbeat about the discounter’s prospects going into the holiday season.

"While Target’s October comparable-store sales were near the low end of our expected range, our third quarter comparable-store sales increase of 2.9% was in line with our guidance," he said in a statement. "As we enter the fourth quarter we feel very good about our holiday season merchandising and marketing plans and our ability to deliver outstanding value for our guests."

It was a better month for Costco Wholesale Corp., which posted a 9.4% rise in total sales to $7.67 billion. Comparable-store sales, helped by gasoline prices and stronger foreign currencies, grew 7%, led by a 9% increase among international warehouses and a 7% gain in Costco’s domestic units. On that basis, analysts had expected a 6.6% rise.

Excluding the favorable impact of gas and foreign exchange, overall comparable-store sales as well as domestic and international results all increased 5%.

Among regional discount chains, Fred’s Inc. reported a 2.8% rise in total sales to $140 million, although comparable-store results dipped 0.8%. According to chief executive officer Bruce Efird, the figures reflect the success of a layaway program launched by the retailer.

The program, which only requires customers to put $1 down on a layaway purchase, succeeded in boosting store traffic, but layaway sales are not recognized for accounting purposes until the final payment is made. Consequently, sales for the month and the third quarter, which ended October 27, suffered.

The layaway program reduced both total and comparable-store sales for October by 150 basis points, but will bolster top-line results for the fourth quarter. As a result, Fred’s management lowered its third quarter earnings guidance to a range of 18 cents to 23 cents per diluted share. Analysts had expected earnings of 23 cents per share.

"The reduction in expected earnings from prior estimates reflects the incremental shift in layaway sales, unfavorable LIFO expense charges in the quarter and a single-event increase in insurance reserves, with a combined impact of 3 cents to 5 cents in earnings per share for the quarter," explained Efird. "However, with the implementation of several key new merchandising and marketing initiatives in the fourth quarter and the positive impact of the forward shifting of layaway sales and earnings, we continue to project a double-digit earnings per share improvement for 2012, with full-year earnings per share now expected to be in the range of 96 cents to $1.02."

Another regional discounter, Abilene, Kan.-based Alco Stores Inc., also reported a modest increase in total sales and a drop in comparable-store sales excluding fuel. The chain’s top line rose 1.9% to $34.2 million, while same-store results without fuel dipped 1.8%. "October sales results in key holiday businesses were positive, including toys, sporting goods, stationery, housewares, domestics and furniture," said Rich Wilson, president and chief executive officer. "The commodity businesses, which were impacted by the shift of Halloween, were essentially flat. Decreases in our apparel business impacted total company same-store sales, and are a result of lower sales in cold-weather apparel due to warmer-than-normal October temperatures."

Wilson added that the company expects a sales boost in the fourth quarter from the installation of freezers and coolers in all of the chain’s 215 stores.

Among the leading drug chains, Walgreen Co. saw October sales decline 2.1% to $6 billion, while comparable-store front-end sales fell 2.9%. The results reflect the impact of Hurricane Sandy through October 31.

Rite Aid Corp., meanwhile, reported a 1.8% decrease in total sales to $1.92 billion, while same-store sales retreated 1.1%, although front-end same-store results increased 1.5%.

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