(c) 2009 
Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission.Shoppers cautiously reemerged in October at both the low-priced and upscale ends of the market, pushing retail sales for the month up modestly from October 2008, the second straight gain after a year of declines.
Discount retailers, including TJX Cos., Ross Stores Inc. and the Old Navy division of Gap Inc., continued their run as the strongest performers this fall. There were also notable year-over-year improvements at higher-end retailers, such as Nordstrom Inc., suggesting a willingness among some consumers to spend more freely.
The results, released Thursday, were tempered by the poor performance of teen retailers. Aeropostale Inc. and American Eagle Outfitters Inc. Both missed Wall Street sales estimates by a wide margin, while Abercrombie & Fitch Co., with a 15% drop from a year earlier, had the dubious distinction of the worst showing of any retailer.
Sales at stores open at least a year, or same-store sales -- a benchmark of the industry's health -- rose 1.8% from October 2008, according to an index of 30 retailers compiled by Thomson Reuters. Retail Metrics Inc., a retail research firm that uses a slightly different methodology, reported an increase of 2.2% for its index of 31 retailers. Neither index includes Wal-mart Stores Inc., the world's largest retailer, which stopped reporting monthly sales earlier this year.
October was the second monthly year-over-year increase for retailers this year and the best performance since April 2008, according to Retail Metrics. The fall momentum has given retailers, beleaguered by a year of sharp sales declines and steep discounting, more confidence heading into the critical holiday shopping season.
TJX posted an increase in sales of 10% in October, with an 18% rise at its HomeGoods brand.
Costco Wholesale Corp. had a strong showing among discounters with sales at U.S. stores rising 3%, excluding gasoline sales. The retailer reported an increase in nonfood same-store sales for the second month in a row and the best performance in 14 months.
"We feel good," said Bob Nelson, head of investor relations at Costco, in an interview. "Sporting goods, apparel, small appliances -- everywhere we're seeing an uptick in our business. As we continue to see more good news every day, it is helping the affluent consumer be willing to part a little more with their cash."
Gap raised its guidance for the third quarter, projecting earnings of 42 to 44 cents per share, higher than the current Wall Street estimate of 38 cents. The casual-apparel retailer posted a 4% increase in same-store sales for October, in large part because of a 14% sales increase at Old Navy.
Higher-price apparel retailers, among the hardest hit in the recession, showed a significant improvement. Nordstrom reported a 6.5% increase in same-store sales, following a 15.7% decline in the year-ago period. Gap's Banana Republic saw sales rise 5% in October, the first increase for the brand since January 2008. Luxury department store Saks Inc. saw a modest, 0.7% increase in same-store sales, citing strong performance in women's designer sportswear.
"The last six months or so have become far more predictable in terms of the volume trends," said Stephen Sadove, chief executive of Saks. "You're seeing a stabilization in terms of consumer attitudes."
The opposite was true for teen retailers. High teenage unemployment and rising gasoline prices have hurt their target audience. It was the worst-performing category, with a sales decline of 5.8%, according to an index of eight retailers from Thomson Reuters. Analysts had projected a 3.2% decrease.
Aeropostale, the most inexpensive player in the preppy teen apparel category, reported a modest sales increase of 3%, well below analysts' expectations of 13.8%. At high-priced Abercrombie & Fitch, which only recently backed away from its no-markdown mantra, the 15% drop was slightly worse than the 14.7% decrease predicted. American Eagle Outfitters Inc. posted a decline of 5%, missing Wall Street estimates of a 1.7% increase.
---
Ann Zimmerman contributed to this article
Credit: By Elizabeth Holmes
My Research
