Warm Days Cool Down October Retail Sales

As expected, balmy October days failed to inspire people to shop for winter coats, but the retail sales results were even a little worse than forecast. The Thomson Reuters Same Store Sales Index actual result for October 2015 showed no change, missing its final estimate of a 0.3% gain. Excluding drug stores, the SSS Index registered a -0.2% comp for October, missing its 0.1% final estimate.

It’s important to note that these results are not final, as the Gap will report October SSS on Nov. 9. However, 75% of retailers missed estimates, hit by lower gasoline prices, the effect of a strong U.S. dollar and the warmer-than-usual weather.

Once again, L Brands was the clear winner. The retailer beat expectations of a 4.4% gain with a 5.0% SSS result. Its Victoria Secret division and Bath & Body Works divisions both reported a 5.0% SSS result as their merchandise continues to resonate with customers. Costco has the biggest weighting in our index and posted a -1.0% SSS. It is being hurt by lower gasoline prices — excluding gas, Costco posted a robust 5.0% SSS. Meanwhile, Zumiez posted the weakest result at -8.1% SSS

Looking forward to Q3, our Thomson Reuters Quarterly Same Store Sales Index, which consists of 83 retailers, is expected to post 1.5% growth for Q3 (vs. 1.7% in Q3 2014).

Exhibit 1.  Performance — Overall and Compared to Expectations

Results by Sector

Costco has the biggest weighting in the Discount sector, and its -1.0% SSS brought the overall sector down. For October, the Discount sector posted a -0.9% SSS, below its -0.5% final estimate. Excluding gasoline sales, Costco’s SSS improves to a robust 5.0%, but below expectations of 5.9%. Meanwhile, Fred’s beat its 1.8% same store sales estimate with a 2.3% comp.

The Apparel sector registered a 1.3% SSS in October, missing its final estimate of 1.4%. Only L Brands beat its 4.4% SSS estimate, and registered a 5.0% comp, followed by Cato Corp. at 1.0%. Meanwhile, Stein Mart posted the weakest result in our retail universe at -2.5%.

Teen Apparel sector was October’s weakest segment within the retail universe. The sector registered a -6.7% SSS, below its -4.6% final estimate. The Buckle missed its final estimate of -3.4%, and reported a -5.8% comp. Meanwhile, Zumiez posted an -8.1% SSS, well below its -6.6% final estimate.