October retail sales results dampening the holiday spirit

With Dec. 25 about seven weeks away, the retail industry is struggling with consumers' eroding confidence and a weakening sales trend amid mounting problems in the economy. (PAUL SAKUMA/ASSOCIATED PRESS)

NEW YORK - The outlook for the holiday shopping season grew bleaker yesterday after retailers posted disappointing October sales results due to consumers' ongoing worries about housing and higher energy prices.

The downbeat news came from all sectors, including mall-based apparel stores like Limited Brands Inc. and department stores like Macy's Inc. Even upscale Nordstrom Inc. posted a rare sales decline, while Wal-Mart Stores Inc., the world's largest retailer, posted sales below expectations, despite its aggressive discounting.

Warehouse club operators including Costco Wholesale Corp. and BJ's Wholesale Club Inc. were among the few standouts, a sign that consumers are searching for lower prices.

"Overall, the sales trend continues to slow," said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass. "I think the consumer is certainly feeling the [economic] pressure heading into the holidays."

Milder than normal weather also hurt sales, wiping out consumers' appetite for winter wear.

The International Council of Shopping Centers-UBS tally was up 1.6 percent in October, below the original 2.5 percent forecast, marking the slowest October pace since 1995. The tally is based on same-store sales, or sales at stores open at least a year, considered a key indicator of a retailer's health.

The 1.6 percent pace was below the 2.2 percent gain averaged so far this fiscal year, which for retailers begins in February. Still, Michael P. Niemira, chief economist at ICSC, estimated that mild weather depressed sales results about 0.75 percentage point.

With Dec. 25 about seven weeks away, the retail industry is struggling with consumers' eroding confidence and a weakening sales trend amid mounting problems in the economy. Throughout the year, shoppers have been faced with higher gas and food bills and depreciating home values. Tighter credit has also become an issue in recent months. And while last week's move by the Federal Reserve to cut a key interest rate by a quarter-point will make it cheaper to borrow money, economists say it may be too late to help boost holiday spending.

Amid such challenges, many stores, including Wal-Mart and Toys "R" Us Inc., aim to jump-start the season early by offering door-buster specials and big discounts starting last weekend in a season that is expected to show the slowest growth since 2002. But shoppers don't seem to be in a hurry to buy.

One big problem is that there seems to be little buzz about must-have items. In the toy business, retailers and manufacturers already bruised by a series of recalls this summer suffered another blow Wednesday when millions of units of a toy called Aqua Dots were taken off shelves; scientists found they contain a chemical that converts into a powerful "date rape" drug when ingested.

"Our customers are clearly facing headwinds that are impacting both sentiment and discretionary spending levels, including weak housing market conditions, high energy prices, and uncertainty in the mortgage and credit markets," said Myron E. Ullman III, chairman and chief executive of J.C. Penney Co.