Major chain retailers reported stronger-than-expected sales in October as energy costs eased, boosting hopes that consumers won't hold back during the holiday shopping season.
October -- a transitional month sandwiched between back-to-school sales and holiday promotions -- isn't considered part of the retail industry's Christmas selling period. But its results are often seen by industry analysts as a gauge of consumer momentum going into the end of the year.
"It says to me, and to a lot of others, that maybe the economic conditions, the fundamentals, going into the holiday season are a little better than we originally feared," said Michael P. Niemira, chief economist for the International Council of Shopping Centers.
Even if that turns out to be true, Niemira said retailers will stick with their strategy of cutting prices early and deeply to entice shoppers into the stores early. "A lot of this stuff is already in motion," he said.
The nervousness of retail executives at this time of year stems from the disproportionate importance that November and December have for the industry. Together, the two months account for 25 to 40 percent of the year's sales for many retail chains, and in some cases the majority of profits.
For discount and luxury retailers, in particular, the news was good last month. A burst of cold weather in much of the country prompted shoppers to snap up sweaters, coats and other winter goods. Wal-Mart Stores Inc., Target Corp. and Costco Wholesale Corp. all posted sales gains that beat Wall Street's expectations. At Wal-Mart, the nation's biggest retailer, sales at stores open at least a year -- called same-store sales and considered a benchmark of a retailer's performance -- jumped 4.3 percent. Same-store sales were up 10 percent at Costco and 5.7 percent at Target.
On the other end of the spectrum, high-end department stores also fared well. Sales at Nordstrom Inc. beat estimates with a gain of 6.4 percent. Saks Inc. came in with a gain of 4.6 percent, while Neiman-Marcus Group Inc. reported a 7 percent jump. Both were better than expected.
Another segment that turned in strong sales gains was teen retailers, such as Abercrombie & Fitch Co. and American Eagle Outfitters Inc., which gained 31 percent and 17.3 percent, respectively.
"Those retailers that are doing the best job of catering to their core customers are being rewarded, and those that aren't are being punished," said Steve Spiwak, an economist with Columbus, Ohio-based retail consulting firm Retail Forward Inc.
There were some distinct losers in October, most notably Gap Inc., which posted a worse-than-expected decline in same-store sales of 5 percent, after suffering for some time for its less-than-hip image. Limited Brands Inc. slumped 4 percent and Federated Department Stores Inc. was off 0.7 percent.
But even for those chains, the important news out of October appears to be that the retreat of gasoline prices has freed consumers to spend more freely than the industry had feared. Spiwak said the results also suggest robust Christmas sales because, overall, people are making more money this year than last because of a strong job market.
"Real salaries are growing more than 4 percent this year, and that's the strongest since 2000, even accounting for inflation," he said. "That's really why consumers are spending.
Tim Lyons, a spokesman for J.C. Penney Co., which beat expectations with a sales gain of 2.4 percent, used a phrase that gets a real workout among retailers at this time of year: "We're cautiously optimistic," he said. But he also noted that October's results don't necessarily predict holiday behavior. It is, after all, only the eighth-biggest retail sales month of the year. So Lyons expects that the unknown of energy prices will keep retail executives wringing their hands, despite last month's gains.
"I don't remember a time when retailers weren't nervous," Lyons said. "I think it's just part of this business. There's always something looming on the horizon that may impact sales one way or another."