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Same-store sales figures expected to decline

Associated Press

The nation’s retailers are set to report sales for established stores on Thursday that are expected to mark the weakest October performance since 1969, when the International Council of Shopping Centers index began. The figures are based on same-store sales, or sales at stores opened at least a year, which are considered a key indicator of a retailer’s health.

Here’s how October is shaping up and what it means for profits:

Same-store sales: Same-store sales are expected to drop 0.5 percent in October, according to the ICSC-Goldman Sachs retail index of about 40 retailers, well below the 2.3 percent average gain seen this past fiscal year. Excluding Wal-Mart Stores Inc., same-store sales are expected to drop 3 percent. Thomson Reuters says many merchants, particularly mall-based apparel stores, could report percentage declines of mid-teens or more. The big exceptions are discounters and warehouse clubs, which are among the only bright spots.

Traffic: The number of customer visits dropped 11.6 percent from Oct. 1 through Oct. 26, according to ShopperTrak RCT Corp., which measures traffic and sales at more than 50,000 outlets across the country. That compares with a 10.2 percent drop over the same time period in September.

Discounting: Even with inventories down, stores are being forced to discount aggressively amid a sharp sales falloff. John Morris, an analyst at Wachovia Capital Markets, said the volume and level of discounts at mall-based apparel stores are running about 10 percent more than a year ago, while inventory is down 10 percent to 15 percent below year-ago levels.

Profits: The retail industry is bracing for its sixth consecutive quarter of profit declines. Ken Perkins, president of research company RetailMetrics LLC, now expects third-quarter profits to fall 12.9 percent, compared to a 7.7 percent decline forecast as of Oct. 1. For fourth quarter, he estimates at least a 2 percent profit drop.

Holiday and beyond: Even before the financial meltdown, some retail consultants expected the weakest holiday performance since the early 1980s. The outlook is only darkening, and many economists predict spending will remain weak through the early part of 2009. Parents are still expected to buy holiday gifts for their children, but they may not buy much else.