Thursday November 6, 9:31 am ET
By Anne D’Innocenzio, AP Retail Writer
NEW YORK (AP) — The nation’s retailers saw their sales plummet last month to the weakest October level since at least 1969, as the financial crisis and mounting layoffs left shoppers too scared to shop.
The stunning drop-off from an already weak September performance is further darkening the outlook for the holiday season and dimming hopes for any industry recovery until at least the second half of next year.
As merchants reported their dismal sales figures Thursday, Wal-Mart Stores Inc., the world’s largest retailer, proved to be among the few bright spots as it benefits from shoppers focusing on buying basics at discounters.
Most other stores, from luxury merchants to teen retailers, suffered steep sales declines as consumers were spooked by shrinking retirement funds and volatile markets. The number of people continuing to receive jobless benefits reached its highest level in more than 25 years, according to government figures released Thursday.
Even warehouse club operator Costco Wholesale Corp., which sells items like TVs along with basics, posted disappointing results.
“Wal-Mart’s solid performance is reflective of the weakness in consumer spending,” said Ken Perkins, president of research company RetailMetrics LLC. “As soon as the financial crisis hit, consumers spending dropped dramatically. … Consumer spending ground to a halt in October.”
Michael P. Niemira, chief economist at the International Council of Shopping Centers, described October’s performance as “awful.”
“This reflects the severity of the current financial crisis,” he said.
According to the ICSC-Goldman Sachs index, sales fell 1 percent, the weakest October performance since at least 1969 when the index began. That compares to a 1 percent gain in September and well below the 1.8 percent average pace so far this fiscal year, which for retailers begins in February.
Excluding Wal-Mart, the October sales number was down 4.6 percent. The index is based on same-store sales, or sales at stores opened at least a year, which are considered a key indicator of a retailer’s health.
Wal-Mart, which has seen its aggressive discounting resonate with shoppers, posted a 2.4 percent gain in same-store sales, beating Wall Street projections for a 1.6 percent gain. Including fuel sales, same-store sales rose 2.5 percent.
At Sam’s Club, its warehouse club division, fresh food, dry groceries and other consumables were strong. Weaker categories included electronics, jewelry and home-related products, the company said.
Wal-Mart predicted that same-store sales for its overall U.S. stores will be up from 1 percent to 3 percent in November.
Target Corp. — which has lagged behind Wal-Mart in recent months because of its heavier emphasis on nonessentials — posted a 4.8 percent drop, worse than the 2.8 percent decline that analysts had expected.
“Sales for the month of October were very disappointing, with continued volatility in daily results,” Target’s President and Chief Executive Gregg Steinhafel said in a statement. “We expect the recent challenging sales environment to continue into the holiday season and beyond as a result of the economic factors currently affecting consumer spending.”
Costco, hurt by currency effects, reported a 1 percent decline in October. Analysts surveyed by Thomson Reuters expected a gain of 3.6 percent.
Macy’s Inc. reported a 6.3 percent drop in same-store sales for October. No estimate from Thomson Reuters was available. Gap Inc. saw a 16 percent drop, worse than the 11.1 percent decline Wall Street had forecast. The retailer reaffirmed its profit outlook for the third quarter, however, as it focused on inventory control. Limited Brands Inc. reported a 9 percent drop in October, a bigger decline than the 7.2 percent analysts were expecting.
Even teens dramatically scaled back their spending. American Eagle Outfitters Inc. reported a 12 percent drop in same-store sales, worse than the 8 percent decline predicted, while Abercrombie & Fitch Co. suffered a 20 percent drop last month, steeper than the 14.4 percent decline expected. Wet Seal Inc. saw its same-store sales fall 6.2 percent, less than the 8.6 percent decline expected. The teen retailer said it now expects third-quarter profit at the high end of its guidance.