by Jharonne Martis.
Warm temperatures and pretty fall colors in October may have drawn people outdoors but didn’t push them towards the shopping malls. Traffic slowed down and the nice weather actually worked against sales of fall merchandise since consumers didn’t feel an immediate need for sweaters and coats. The Same Store Sales (SSS) Index actual result for October 2014 was a gain of 3.9%, beating the final estimate of 3.5%. Excluding drug stores, the index registered a 2.5% gain, matching its final estimate.
The 3.9% gain is a tick above the 3% increase that indicates a healthy retail economy, but October produced few clear trends, being a shoulder season between back-to-school and holiday. Retailers recorded mixed results — half beat SSS estimates, while half missed.
Looking toward Q3, which in retailing ends Oct. 31, the outlook doesn’t seem particularly strong. Our Quarterly Same Store Sales Index, which consists of 76 retailers, is expected to post 2.3% growth for Q3 2014 (vs. 2.9% in Q3 2013).
Exhibit 1. Performance — Overall and Compared to Expectations
The Discount sector came out relatively strong, with 3.9% SSS gain, above its 3.6% final estimate. Costco’s 4.0% SSS increase beat its 3.6% estimate. Excluding gasoline sales, Costco’s SSS gain improves to 7.0%, beating expectations of 5.6%. Meanwhile, Fred’s missed its 1.8% estimate with a -1.4% comp. “Sales for October were below expectations. While general merchandise sales and traffic were adversely affected by the warmer weather, the primary driver for the sales miss was related to changes made in our layaway program this year and the lack of incremental sales from layaway customer visits during this October as traffic declined late in the month.” (Source: FRED news release, 11/6/14).
Both general and teen apparel sectors were weak. The Gap reported a disappointing -3.0% comp, missing the -1.9% estimate, and its results pulled down the entire clothing group. Its Banana Republic Global division posted the biggest miss in our retail universe with a -7.0% comp, below its -4.9% estimate. Apparel overall registered a -0.5% SSS in October, missing its final estimate of -0.1%. Looking for good news, Cato posted the biggest SSS beat, with a 2.0% gain, above its 1.0% comp estimate.
Teen Apparel registered a -1.5% SSS for October, below its -0.5% final estimate. The Buckle was down by 4.4%, missing its final estimate of -2.3%. Zumiez beat its estimate, posting a 3.1% SSS gain that was above its 2.3% final estimate.