The Black Friday shopping bonanza sets a precedent for holiday season sales in the US. But rarely has it been more important to fashion retailers as many try to manoeuvre their way out of the red after an all-round colourful third quarter. Joe Ayling reports.

As lower consumer spending continues to hit most US clothing stores, terms like "strategic reviews", "restructuring charges", "revised guidance" and "cost-saving initiatives" cropped up time and time again in the third-quarter results released this month.

But as fashion chain struggle to get to grips with a turbulent US economy, the Washington-based National Retail Federation (NRF) said consumers "went into hibernation" during October as the full scope of the financial crisis took hold.

Sales at clothing and clothing accessories stores fell 3% from the same period a year ago and 1.4% from September.

Third quarter blues
There was little quarterly joy for women's wear retailers like AnnTaylor Stores, which swung to a loss of US$13.4m and warned of a weak holiday season. The company, which operates 966 stores, reported a profit of $40.8m a year earlier.

New York & Company, which has 580 retail stores, also swung to a third quarter loss blaming the "dramatic deterioration of the economy". It posted a net loss of $8.0m compared to a profit of $5.3m in the same period last year.

Liz Claiborne also swung to a third quarter loss of $69m, after being hit by costs related to brands it has sold, discontinued and licensed under its strategic review.

Meanwhile, Limited Brands, which operates over 2,900 speciality stores including Victoria's Secret, posted a 65.3% drop in third quarter profit to $4.2m.

Nor was there an escape for men's wear operators either, with The Men's Wearhouse seeing a 61% drop in profit at its 1,285 stores despite more tuxedo hires during the period.

Big and tall men's apparel company Casual Male Retail Group managed to narrow its third quarter loss to $3.2m from $3.8m in the same period last year though. The company, which operates 520 stores, is heading to Europe with its XL format.

E-commerce was a saving grace for many retailers' revenue streams during the third quarter, and "cyber Monday" is becoming an extension to the holiday sales schedule.

However, online fashion firm Bluefly only reported "relatively unchanged" profit of $5m in Q3, despite a sales rise of 9.4%.

Meanwhile, department stores and supermarket operators are bracing themselves for a slower holiday period than usual - with many cutting fourth quarter and fiscal year earnings guidance.

Discount retailer Target Corporation, which operates 1,684 general merchandise and food discount stores, said net earnings dropped to $369m for the quarter from $483m a year ago.

Fears over the negative impact of fluctuating currency exchange rates on its international business led Wal-Mart Stores to cut its full-year earnings guidance - even though it achieved solid third quarter sales and earnings growth.

However, department store operator Kohl's Corporation posted a 17.4% drop in quarterly profit to $160.2m and JC Penney Company's net income was down 52% on lower sales and higher markdowns.

Saks Incorporated swung to a third quarter loss after being hit by weak sales and a charge for the closure of its Club Libby Lu chain. Saks, which has 53 stores, said its net loss was $42.8m, compared to a profit of $21.6m in the same period last year.

Macy's Inc, which operates 850 Macy's and Bloomingdale's stores, said the quarter produced a loss of $44m, down from a profit of $33m a year earlier.

Meanwhile, falling sales and one-off charges sent the Dillard's chain spiralling to a $56m loss, despite a range of cost-saving measures.

Many other retailers also suffered from weak sales, with third quarter profit at Nordstrom more than halved and the Seattle-based retailer planning to scale back its expansion over the next two years.

There were further profit slumps at Cato Corporation, Chico's and American Eagle Outfitters, while Stein Mart, Citi Trends widened third quarter losses and Stage Stores swung to a third quarter loss.

Some respite for Foot Locker, Genesco
Some sportswear and footwear retailers in the US managed to improve their performance over the quarter, with New York-based athletic retailer Foot Locker, which operates 3,714 stores in North America, Europe and Australia, swinging to a profit after last year's quarter was hit by store closure costs of $66m.

Genesco reported earnings from continuing operations of $9.5m for the third quarter, compared to earnings from continuing operations of $5.6m last year.

However, net income at Zumiez fell to $6.8m, down from $8.1m for the third quarter of the prior fiscal year, following a margin slump in September and October.

Furthermore, value footwear retailer Shoe Carnival posted a 38% plunge in third quarter profit after being hit by a sales slowdown, and DSW reduced its full-year profit forecast after third quarter income fell 41% to $13.2m.

There were other third quarter exceptions, such as cut-price retailer The TJX Companies, whose profit inched up 2% to $254m and lifestyle retailer Urban Outfitters, which reported a 31% hike in earnings, helped by rising sales at its Anthropologie, Free People, and Urban Outfitters brands.

Meanwhile, The Bon-Ton Stores, Coldwater Creek all narrowed their quarterly losses, while Hot Topic, The Wet Seal, The Buckle, The Children's Place Retail Stores and Ross Stores boosted their profits on better sales.

Gap also surprised the market by posting a 3.4% rise in third quarter profit after lower sales at all its chains were offset by higher margins and reduced inventory levels.

However, positive results were often followed by a lowered outlook for the fourth quarter in expectation of a bleak holiday season.

Holiday spirit to spur revival?
In a month when the US elected a new president, businesses will be hoping that a change at the top, together with two major bailouts in country's banking system, will filter down during fiscal 2009.

The likes of Gap Inc and Wal-Mart are likely to ride the economic storm but the collapse of Steve & Barry's is a telling sign that Chapter 11 is a looming threat for smaller firms carrying outstanding debt.

In the short term, retailers are counting on post-Thanksgiving Black Friday markdowns being too much to resist.

According to a preliminary Black Friday shopping survey conducted by BIGresearch for the NRF, up to 128m people will shop this Friday, Saturday or Sunday, down slightly from 135m over Black Friday weekend last year.

A drop in the average price of self-serve, unleaded gasoline is expected to leave shoppers with a little extra padding in their wallets too.

"Retailers realise that low prices will get consumers into stores this holiday season, and this could be the most heavily promotional Black Friday in history," says Tracy Mullin, NRF President and CEO.

"Shoppers who held off buying a DVD player or winter coat over the last few months will find that prices may literally be too good to pass up."