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Specialty Store Sales Rise

November 16, 2010

Women's Wear Daily

by LIZA CASABONA with contributions from EVAN CLARK

WASHINGTON — Retail apparel sales in October showed faint signs of life, but with the holiday season looming they still have a long way to go to full recovery.

Sales at specialty stores rose 0.7 percent in October compared with September, but department store sales declined 0.7percent, the U.S. Commerce Department said Monday.

In 12-month comparisons, sales at specialty stores increased 3.5 percent to $18.2 billion, while department store sales fell 2.2 percent to $15.4 billion. Sales at general merchandise stores, a category that includes department stores and discounters, rose 0.2 percent month to month and increased 2 percent to $51.1 billion compared with a year earlier.

Apparel sales are still below where they were before the recession, said Scott Hoyt, senior director of consumer economics for Moody’s Analytics. Monthly increases can obscure that “in a long-term context the level of sales is still going to be very weak,” he said.

Bob Grbic, chief credit officer with Capital Business Credit, said while there seems to be a positive trend, significant challenges loom for retailers in high unemployment, flagging consumer confidence and rising labor, raw material and transportation costs.“No one’s throwing a party about the [retail sales] numbers,” Grbic said.

When sales are driven by heavy discounting, it can have a negative impact on retailers’ gross margins, he said, and the pending holiday season is likely to be highly promotional.

“We need to see improvement in key economic indicators to sustain any long-term growth,” said Matthew Shay, president and chief executive officer of the National Retail Federation.

In the overall economy, retail sales were up 1.2 percent in October compared with September, and advanced 7.3 percent to $373.1 billion from a year earlier. The October increase was driven mostly by a spike in car sales. The month-to-month increase was the strongest since March and the fourth consecutive rise, said Commerce Secretary Gary Locke.

Some of the larger retail outfits have already launched Black Friday promotions to help spur early holiday sales, noted Chris Christopher, senior principal economist with IHS Global Insight. Retail sales in many channels were “lacking,” he said, but“good news is on the way. The holiday season should be relatively robust and much needed to a battered retail industry.”

On Wall Street Monday, the S&P Retail Index slipped 1 percent, or 4.96 points, to 473.30 Monday, as the Dow Jones Industrial Average inched up 0.1 percent, or 9.39 points, to 11,201.97.

Among the retail decliners were Sears Holdings Corp., down 2.1 percent to $67.72; Macy’s Inc., 1.4 percent to $24.70; Gap Inc., 0.8 percent to $20.32, and, in advance of its after-market report on third-quarter earnings, Urban Outfitters Inc., 0.5 percent to $32.74.