Retailers report luxury sales are up but so are sales at Walmart and Costco. Meanwhile other stores like JC Penny and Kohl’s are using the old standby of blaming the weather for lack of sales.

Promotions started early this year because of lack of demand, hardly a sign of strength. Moreover, October is a weak month. Given that sales last year were especially weak, year-over-year comparisons are suspect.

Thus, it’s hard to make much of anything from retail sales reports in an aggregate sense, but there are some interesting trends at individual store levels.

The New York Times reports Retailers Tally a Mixed October as Sales Rose 1.6%

At the 28 stores tracked by Thomson Reuters, an index that excludes the nation’s largest retailer, Wal-Mart, there was a 1.6 percent increase in sales at stores open at least a year. That met analysts’ expectations, and marked the 14th month of increased sales. But the positive results have been compared with months last year that had significant declines because of the economic downturn.

Several retailers, including J. C. Penney, Kohl’s, Stage Stores, Macy’s and Stein Mart, blamed unusually warm weather for their results, saying it lessened interest in cold-weather clothing.

Discount retailers posted the best results over all, with an average increase of 3.8 percent from a year ago. Costco led that category, with a 6 percent rise in sales.

A resurgence in luxury spending seemed to have legs, with the two higher-end department stores — Saks Fifth Avenue and Nordstrom — reporting the highest increases among the department-store category. Saks’s sales were up 8.1 percent, and at Nordstrom’s full-price stores (as opposed to its discount outlets), sales rose 4.8 percent. But Dillards, Bon-Ton Stores, J. C. Penney, Kohl’s and Stage Stores all reported declines from last year, and the latter three missed analysts’ expectations.

The biggest decline was the teenage retailer Hot Topic. Sales at stores open at least a year fell 8.5 percent, and that was as compared to a 2.6 percent decline from October a year ago.

Ken Perkins, the president of the consulting firm Retail Metrics, called it a “strange brew” in a note to clients.

Selective Shopping

The Wall Street Journal mentions “selective shopping” in Retailers Showing Mixed October Sales Results

“There is a market-share war that is heating up as we move into the holiday season and some retailers evidently are already pulling out the big guns, creating winners and losers,” said John Long, retail strategist at Kurt Salmon Associates.

Aeropostale Inc. appears to be a victim of the pricing wars among teen retailers, posting a 2% drop in October same-store sales when analysts expected a 3.1% rise. The company is being pinched as other chains that sell teen apparel, like Abercrombie & Fitch Co. and American Eagle Outfitters Inc. have been lowering prices, encroaching on Aeropostale’s corner of the market.

The results are giving a taste of what retailers may expect for Christmas, more selective shopping from consumers who are still not comfortable with the economy. Projections for holiday season sales vary, ranging from a slight loss to over 4% growth, reflecting even economists’ uncertainty about the season.

The situation has also caused some retailers to already begin promoting Christmas. Sears Holdings Corp. is already advertising “Black Friday” specials. Toys R Us is promoting its catalog of holiday toys and gadgets. In a sign of the kind of approach many retailers may take this holiday season, the Toys R Us catalog has an application for smartphones and is Internet-friendly.

Explaining the Strange Brew

It seems easy enough to figure the surge in luxury spending can be attributed to the stock market rally. However, the good news pretty much seems to end there.

Walmart is up but J. C. Penney, Kohl’s, Stage Stores, Macy’s and Stein Mart all blame the weather.

Teen Sales Telling

The teen retailer segment was anemic with the exception of Zumiez which reported a 21.5 percent increase. However, last year the store had a decline of 8.9 percent. Perhaps a reflection of age, I have to admit I have never seen a Zumiez store but I certainly have been in many Abercrombie & Fitch, American Eagle Outfitters Inc, and Hot Topic stores (the latter out of curiosity).

Given the number of struggling families where every penny counts and given high teen unemployment, one should not be surprised by the poor performance in the teen group (discounting Zumiez as an outlier).

Late October Surge

The above articles mentioned a surge in late October spending. That surge was picked up in a Gallup survey. However, Gallup claims a pickup in spending in late October is the typical pattern. See Gallup Surveys Shows Anemic October Consumer Spending, No Pickup in Christmas Spending Plans for details.

Consumer Squeeze

That Walmart and Costco are doing well is a sign of a consumer squeeze, not a sign of strength.

All of this points to a mediocre Christmas.

Mike “Mish” Shedlock
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