What to Watch for Now at 8 Key Retailers

Retailers posted a broad increase in October same-store sales, as the industry continued to adjust its estimates to what market watchers call “a new normal.” Although the numbers may look favorable compared to last year’s, don’t expect this new normal to be anywhere near the good old days.

Sales at stores open at least a year rose 2.1% percent in October, according to the International Council of Shopping Centers-Goldman Sachs report. That’s compared to a 4.2% drop last year in October.

“We’re going against such easy comparisons, and it looks like maybe we’re hitting the new normal, but it may take a few more months to play out and see,” says Marie Driscoll, a retail analyst in Standard & Poor’s equity research department. “As we go forward, we know this time a year ago, retailers were really concerned, they were way over inventory, and drastically dropped prices. We’re not in that position this year.”

Now, retailers seem to be in a better inventory position, giving them more agility, and the beginning of the month had strong demand, possibly due to the need for cold weather apparel, says Driscoll. But the numbers turned weaker as the month progressed, “and that’s disconcerting.”

Traders should keep in mind that job creation is at a standstill, and if people aren’t earning, then they’re usually not spending. Given the employment situation, retailers were fortunate to see a slight uptick, says Emanuel Weintraub, president and CEO of Emanuel Weintraub Associates, a management consulting firm specializing in the retail apparel. Recent indicators suggest stabilization may have helped. “Those people who are employed are now thinking that since they haven’t been fired yet, maybe their jobs are secure,” he says.

Although there may be modest pent-up demand, this is still not an exuberant consumer economy, Driscoll says. And the big picture showed that as 52% of retailers came in below expectations, 44% topped Wall Street views.

“The big thing is that the new normal has arrived,” says Weintraub. “Strong retailers will survive, the weaklings will definitely go out of business, and the idea of anyone ever really seriously contemplating that they’re going to do the quantities they did in the past is not realistic.”

So what’s next for retailers? SmartMoney looked at eight companies that reported October results and examined what their hits and misses mean for them as they head into the holiday season.