October Sales Strong
Cash registers were ringing during October, and retailers reported good sales.
L Brands Inc.—the parent company of Victoria’s Secret, Pink and Bath & Body Works—posted its first positive same-store sales since November 2016. Same-store sales increased 2 percent during October. The company noted that Victoria’s Secret’s April 2016 exit from swim and clothing categories was still having a negative impact on its sales performance. In October, it cost the company 1 percentage point in its same-store sales. However, the good performance gave L Brands confidence. On Nov. 1, L Brands updated its forecast of its third-quarter earnings to be at the high end of its previous guidance of $0.25 to $0.30.
Zumiez Inc., a mall-based action-sportswear retailer, posted comparable-store sales of 6.6 percent for October.
Retailers going through turbulent times also announced relatively better sales performances than in the past. Mall-based denim retailer The Buckle posted a 3.7 percent same-store decline. It’s one of the retailer’s lowest comp declines in more than a year.
Cato Corp., an off-price retailer, posted a decline of 7 percent. John Cato, the retailer’s president and chief executive officer, said better business did not keep some of the market’s challenges at bay.
“Although October same-store sales are better than the current year trend, our two-year, same-store-sales comparisons remain below expectations. Consequently we expect our full-year earnings to be significantly below last year,” he said in a prepared statement.
A strong October was no guarantee of a robust holiday season, said Jeff Van Sinderen, a retail analyst for B. Riley & Co. “October is more of a transitional/clearance month. So it does not tell you that much about how holiday will go,” he wrote in an email. “However, I do think there are some early themes brewing: colder-weather merchandise is off to a slow start and that could turn into a fire-sale promotional debacle of sorts. It’s already really promotional out there, especially in department stores, and that is concerning from a broader perspective. The companies with differentiated, in-demand merchandise are increasingly likely to outperform for holiday.”
The U.S. economy has been showing strength in the past month. Human-resources group ADP reported that nonfarm jobs increased 235,000 from September to October.