November 7, 2013 / 1:23 PM / 5 years ago

U.S. retailers' October sales rise, but holiday concerns remain

(Reuters) - Costco Wholesale Corp (COST.O) and Victoria’s Secret parent L Brands Inc LTD.N were among the major U.S. retailers to report same-store sales gains for October, but many chains expressed caution heading into the holiday season.

Shoppers push a trolley outside a Costco Wholesale store in Los Angeles, California March 6, 2013. REUTERS/Mario Anzuoni

Consumer confidence has dipped, in part because of slow employment growth, and shoppers have gravitated toward bargains in recent months.

A group of eight U.S. retailers reported an overall 3 percent increase in sales at stores open at least a year, better than analysts’ forecasts of 2 percent, according to Thomson Reuters data.

Gap Inc (GPS.N), which is also part of the same-store sales index, will report after the market closes.

The Standard & Poor’s Retail Index .SPXRT was down 1 percent on Thursday, while the broad S&P 500 stock index .SPX fell 0.5 percent.

Costco reported a slightly bigger-than-expected 3 percent gain in same-store sales. Fresh food was among its best-selling products, and the weakest category was consumer electronics.

L. Brands said its same-store sales were up 8 percent, well above the 2.2 percent gain Wall Street analysts were expecting, according to Thomson Reuters.

The 16-day U.S. government shutdown at the start of the month weighed on consumer confidence and slowed job growth. U.S. job growth probably slowed sharply in October, with the unemployment rate ticking higher, according a Reuters survey of economists published this week.

The International Council of Shopping Centers is forecasting same-store sales will rise 3 percent to 4 percent in November, in part because the shutdown has ended, eliminating one source of consumer anxiety, Chief Economist Michael Niemira said. But the trade group still expects only modest growth this holiday season.

Many retailers noted worrisome patterns as retailers head into the holiday season.

Drugstore chains Walgreen Co WAG.N and Rite Aid Corp (RAD.N) reported softer sales of general merchandise and slower shopper traffic, continuing a trend many companies have noted in recent months.

Fred’s Inc (FRED.O) said more shoppers made greater use of its layaway program. Lower-income customers typically use such programs, paying for goods in installments before picking them up.

J.C. Penney Co Inc (JCP.N), which is not in the same-store sales index, reported its first monthly increase in nearly two years, but deep discounting had a lot to do with that.

“We expect the holiday season to be extremely competitive,” Penney Chief Executive Officer Myron Ullman said in a statement.

Cool weather helped some retailers, such as low-priced clothing chain Cato Corp (CATO.N), as shoppers replenished their autumn wardrobes.

But Cato also said it expected a tough holiday quarter, as did teen chain Abercrombie & Fitch Co (ANF.N).

The Buckle (BKE.N) and Zumiez Inc (ZUMZ.O), which also cater to teens, reported only modest same-store sales gains for October.

Morgan Stanley last week issued a research note forecasting the weakest holiday season since 2008, when the financial crisis decimated retail sales.

Perfume maker Coty Inc (COTY.N), whose U.S. customers include Wal-Mart Stores Inc (WMT.N) and Target Corp (TGT.N), said on Thursday that some of its large retail clients in the mass market had cut back on orders.

Reporting by Phil Wahba in New York; Editing by Lisa Von Ahn

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