Retailers turn in disappointing sales for October

NEW YORK - The nation's largest retailers turned in a mixed performance in October as specialty stores reported strong sales and department stores were stymied by heavy markdowns that eroded their profits.

The outlook for the holiday shopping season appears disappointing. Wal-Mart Stores Inc., the world's largest retailer and usually one of the industry's best performers, warned Thursday that its fourth-quarter sales will be slightly below Wall Street estimates. However, Wal-Mart said its October results met expectations.

Stock market volatility, rising fuel prices and slower consumer spending continue to plague retailers, according to analysts who reviewed the sales results released Thursday. And many believe these problems will continue through the holiday season.

''October sales results are clear evidence that there's a consumer spending slowdown,'' said Kurt Barnard, publisher of Barnard's Retail Trend Report, based in Upper Montclair, N.J. ''This will continue through holiday. Most companies will fail to match last year's numbers let alone exceed them.''

The latest measure of consumer confidence has added to the growing expectation that this will be a difficult holiday season for retailers. On Tuesday, the Conference Board reported a sharp drop in its consumer confidence index, indicating that Americans are growing more conservative about spending.

John Morris, an analyst at Gerard Klauer Mattison, believes that any sales increases have been achieved at the expense of heavy discounting of merchandise, which eat into retailers' profits.

''A lot of retailers have cleared the decks, and are relying on other channels to move out the leftovers,'' he said. ''They are keeping stores fresh, but there is still an awful lot of inventory in the stores.'' He added that he foresees more markdowns for the holiday season.

Department stores generally turned in disappointing sales, with Federated Department Stores Inc., J.C. Penney Co. Inc. and Dillard Inc. not meeting analysts' expectations. Penney warned that it expects to see its third-quarter loss to at least double from recent forecasts.

On the other hand, May Department Stores Co., Target Corp. and Sears, Roebuck and Co. reported they met sales goals for the month.

Even discounters, which have been the most hurt by rising fuel prices, have found themselves struggling, with Bradlees Inc., Ames Department Stores Inc., Kmart Corp. and Costco Inc. not meeting Wall Street's forecasts for October.

Bradlees chairman Peter Thorner blamed its 9.2 percent decrease in sales at stores open at least a year to ''higher gas and heating oil prices, a tightening in consumer spending, and a lack of must-have fashions or consumer products.''

Sales at stores open at least a year, known as same-store sales, are the most widely used measure of retailers' strength.

The big winners last month were specialty stores, with Talbots, Limited Inc., Wet Seal Inc. and Pacific Sunwear of California all reporting strong sales.

A big exception was Gap Inc., which reported Wednesday that its same-store sales fell 2 percent because of heavy markdowns. It also warned that its third-quarter results would come in slightly below Wall Street expectations.

At Wal-Mart, same-store sales were up 4.9 percent, while total sales gained 10.1 percent. Federated reported same-store sales up 1.6 percent, while total sales rose 0.6 percent. Dillard saw same-store and total sales fall 2 percent.

Selected figures on October's sales at other leading chains:

- May, same-store sales up 2.6 percent; total sales up 7.2 percent.

- Kmart, same-store sales down 2 percent; total sales flat.

- Sears, same-store sales up 3 percent; total sales up 4.1 percent

- Kohl's Corp., same-store sales up 9.5 percent; total sales up 31.4 percent.

- Talbots, same-store sales up 19 percent; overall sales up 21 percent.