U.S. retail chains reported October sales that rebounded from the lows of a year ago but many failed to surpass Wall Street's boosted expectations as consumers spend selectively headed into the holiday season.
Retailers including warehouse club operator Costco Wholesale Corp
But teen retailers Abercrombie & Fitch Co
Retail shares reflected some of the news, with Gap trading 2.5 percent higher premarket. Aeropostale fell 8 percent.
Consumers are being attracted by what the prices are. Unless they feel that they're getting a good value for their money they won't shop, said Jharonne Martis, director of consumer research for Thomson Reuters.
That can be a problem going into the holiday season. However, retailers knowing this already are saying that they will be offering steep promotions.
In the latest tally of results, 45 percent of retailers posted sales that beat expectations, while 50 percent came in below estimates, according to Thomson Reuters data. That was based on reports from 22 out of 30 companies tracked.
October typically offers retailers a break between September's back-to-school shopping season and November's mad dash to kick off the pre-Christmas sales rush.
But this year, October sales are being watched closely for signs that a consumer recovery is taking hold heading into the holidays and that September's better-than-expected sales were not a fluke.
SALES MOMENTUM OR FLUKE?
Last October, same-store sales plunged 4.1 percent after a financial markets crisis vaporized household savings and constricted access to credit.
With such a dismal base to work from, October results were expected to show an improvement from a year ago. October's same-store sales were forecast rise 2.0 percent, according to Thomson Reuters data.
That represented a steadily more optimistic view as analysts raised their sales estimates. Less than a week ago, the prior forecast was for October same-store sales to rise 1.2 percent.
Analysts kept saying that traffic in stores was improving, driven by colder weather, which helped the sale of fall merchandise, Martis said.
According to weather-tracking firm Planalytics, it was the coldest October in the United States since 1976 and the wettest in 50 years. That drove demand for wiper blades, snow-removal equipment, long-sleeved shirts and portable heaters.
While Costco's results were helped by a weak U.S. dollar, which boosted overseas sales, same-store sales in categories besides food, like sporting goods, cameras and small appliances, were positive.
Big Lots Inc
But many retailers failed to live up to Wall Street expectations.
Same-store sales at Limited Brands Inc
American Eagle Outfitters surprised analysts with a 5 percent fall in October same-store sales and also forecast third-quarter earnings below Wall Street expectations, sending shares down 6 percent.
Analysts were expecting a rise of 1.7 percent in October same-store sales.
After a very positive start, store traffic slowed in the second half of the month, it said.
Although store traffic in October was disappointing, we continue to be optimistic about our opportunities this season, the company said on a pre-recorded call.
(Additional reporting by Benjamin Klayman and Jessica Wohl in Chicago, Martinne Geller, Michele Gershberg and Dhanya Skariachan in New York; editing by John Wallace, Dave Zimmerman)