Retail Forecast Mixed as Stores Brace for Holiday Season

October retail sales missed Wall Street expectations, with companies reporting weak numbers as the holiday season approaches.

Sales rose in October by 3.4 percent among 22 major retailers tracked by Reuters, compared to the previous year, below estimates of 4.5 percent.

Gap Inc., which recently announced it was closing a fifth of its stores in the next two years, had a six percent drop in sales. J.C. Penney was down 2.6 percent. Saks Inc. had an increase of 1.8 percent, below an expected 5.4 percent increase. Nordstrom gained 5.4 percent, but below a 6.4 percent increase. Costco, the biggest gainer at nine percent, was still below an expected 9.2 percent increase.

The National Retail Foundation in October predicted a 2.8 percent increase in holiday retail sales to $465.6 billion, down from the 5.2 percent increase in 2010. There have been 14 consecutive months of retail sales growth, but higher gas and food prices, job concerns and fiscal policy are expected to dampen sales.

Persistently high unemployment, an erratic stock market, modest income growth and rising consumer prices are all combining to impact spending this holiday season. How Americans will react to shaky economic data is the question, but the good news for retailers is that shoppers have not yet thrown in the towel, said Jack Kleinhenz, the National Retail Foundation's chief economist, in a statement.

Jeffrey Roseman, an executive vice president and principal at real estate brokerage Newmark Knight Frank Retail, said he expected discount stores and luxury brands to do well, but mid-market stores to suffer during the holidays. Retailers continue to eye major citiies like New York, Los Angeles, Washington, D.C. and Chicago, driving up rents in particularly desireable areas, he told IBTimes.

In October, the Japanese discount apparel store Uniqlo opened its flagship store at 666 Fifth Avenue in Manhatan, paying a record $300 million in rent over 15 years. Recent bankruptcies for Borders and Filene's Basement have also opened up vacancies in some of New York's prominent submarkets, including Penn Plaza, Columbus Circle and Union Square.

For spaces in the middle of the country, Roseman said that landlords are becoming more creative, taking on non-traditional tenants like entertainment companies. The key to that market is being nimble, he said.

UItimately, the success of the holiday season may hinge on factors outside of retailers' control. If another massive snowstorm hits the northeast during a major shopping period, sales will suffer.

A lot is dependent on the weather, said Roseman. Luck comes into play.