Reuters
U.S. chain store sales drop bad omen for holidays
Tuesday October 29, 11:48 am ET
By Pedro Nicolaci da Costa
(Combines BTM/UBSW and Redbook reports)
NEW YORK, Oct 29 (Reuters) - Worries mounted for U.S. retailers that the all-important holiday shopping season could flop this year, after two reports on Tuesday showed a drop in chain store sales last week.
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Retail sales at the nation's chain stores slipped a sharp 1.9 percent in the week ended Oct. 26 after a 0.6 percent rise in the previous week, the Bank of Tokyo-Mitsubishi and UBS Warburg said in a joint report.
A separate report, the Redbook survey, showed sales growing 1.4 percent during the first three weeks of October. But the weekly report, published by Instinet Research, said sales slowed in the third week of the month.
In another warning sign, consumer confidence slipped in October to the lowest level since November, 1993, according the Conference Board's Consumer Confidence Index. It was the fifth straight monthly decline for the widely followed indicator.
As retailers brace for the holidays, the omens are grim.
"All this goes hand in hand with a very nervous consumer and one that is not found shopping and is not found spending," said Mike Niemira, senior economist at BTM.
Niemira, who had been forecasting holiday sales at stores open at least a year in a range between 2 percent and 3.75 percent compared with last year, said he now believes sales will come in at the lower end of that band.
"That's not a great performance if that happens," he said.
Analysts said a plethora of negative news, from layoffs to fear of war, is weighing on consumers' minds.
"The sniper attacks probably added to concerns about Iraq, the stock market had been falling and everything else, the labor market is still weak," said Robert Mellman, senior economist at J.P. Morgan.
Still, he said, the magnitude of the drop in the Conference Board's consumer confidence index took him by surprise. The private research firm based in New York said its index of confidence tumbled to 79.4 in October from 93.7 in September.
The index was much lower than the average forecast of 89.7 by economists surveyed for a Reuters poll conducted last week.
Consumer spending accounts for two-thirds of U.S. economic activity, so the sales lag, coupled with the decline in confidence, has analysts worried about the nation's near-term economic prospects.
NOT ALL BAD
Still, not all retail sector news this week was negative.
Wal-Mart Stores Inc.(NYSE:WMT - News), the world's biggest retailer, said on Monday its sales in the past week put it on track to meet its October sales growth target of 2 percent to 4 percent.
But it added that Halloween candy and costume sales were still "below plan".
J.C. Penney Co. Inc. (NYSE:JCP - News) raised its quarterly earnings target on Monday as colder weather and aggressive discounts pushed October sales well above expectations, while other leading U.S. retailers reported weekly sales that were in line with forecasts.
The Bank-of-Tokyo Mitsubishi and UBS Warburg Weekly Chain Store Sales Snapshot is compiled from seven major discount, department and chain stores across the country that report their weekly results.
The Redbook Retail Sales Average, released weekly by Instinet Research, is a sales-weighted average of annual growth in same-store sales at discount, department and chain stores.
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