Octobers retail sales offer hope for the holidays

October's retail sales offer hope for the holidays

Sitting between the back-to-school spending rush and the all-important holiday shopping season, it's perhaps not surprising that October sales growth at US retailers came in at just 1.6% - the slowest year-on-year gain since April.

That said, any growth at all is welcome in the current economic climate and October even managed to put in a noticeable improvement compared to the same month last year.

The positive performance also came against tougher comparisons with the year-ago period when sales started to improve following the worst months of the downturn, as well as a warm-weather drag on sales of autumn clothing lines like coats and sweaters.

"Building on September's gains, family and children's apparel performed well in the immediate post back-to-school clearance season," notes Michael McNamara, vice president of research and analysis for MasterCard Advisors SpendingPulse.  

According to its research, overall apparel sector sales were up a sharp 8.2% on October last year - the biggest rise so far this year - building on the 3.8% gain booked in September. The figures mean the clothing sector has enjoyed seven out of ten months of year-on-year gains so far in 2010.

Within the sector, women's apparel was 5.3% ahead of last year, while the children's and family segments saw solid gains of 8.7% and 11.6% respectively. Footwear was up 5.9%, with men's apparel the only category to lose ground, slipping 0.3%.

Apparel was another winner in the eCommerce sector, SpendingPulse data shows, with sales up 16.7%. Online footwear sales also posted double-digit gains of 17.8%.

Retailers including Limited Brands, Gap Inc, Ross Stores and Macy's all reported better-than-expected October sales. And a positive financial market performance seemed to help higher-end luxury retailers like Saks and Nordstrom.

But mid-priced JC Penney and Kohl's Corp both posted unexpected declines, and teen retailers like Abercrombie & Fitch, Aeropostale, Hot Topic and American Eagle Outfitters turned in disappointing sales after an earlier lift from the back to school period.

October's retail sales offer hope that consumer spending will continue to hold up heading into the key holiday selling period. The most important event in the sales calendar kicks off in just a few weeks on Black Friday, or the day after Thanksgiving.

"Improving spending intentions among shoppers should ensure that sales growth does not sag too much as the year-ago comparison periods get even tougher into November and December," says Frank Badillo, senior economist at Kantar Retail.

While the National Retail Federation has forecast a 2.3% rise in holiday retail sales to $447.1bn this season, discounts and special offers are likely to remain key to separating the winners from the losers.

Indeed, retailers like Wal-Mart, Target and Sears have already started their own early holiday promotions in an attempt to woo the first shoppers.