Nov 3, 2009

Another upside surprise may be in store for U.S. retailersBy BaltimoreSun.com

New York, NY – Having already registered two straight months of better-than-expected sales, U.S. retailers’ October results may top the mark again and lead some to raise their profit outlooks heading into the industry’s crucial holiday period, analysts said.

Colder-than-typical weather has bolstered demand for jackets and other seasonal merchandise, industry observers say, while pent-up demand after a year of hunkering down and taking a pass on nonessential purchases has also improved store traffic. Columbus Day and Halloween sales and fashion trends such as plaid also spurred some demand, according to the analysts.

Still, the biggest cause for optimism is the bleakness of year-earlier sales amid last fall’s financial crisis, analysts said.

“We continue to be encouraged by stronger traffic trends across the retail spectrum, with both discounters and mall retailers noting improvement from earlier this year,” said Barclays Capital analyst Bob Drbul, who on Monday raised his sales estimates for general-merchandise and department-store retailers; he has now forecast an increase of 1.6 percent, compared with his earlier estimate of a 1.8 percent decline.

He raised his expectations on retailers from Target Corp. and Macy’s Inc. to Kohl’s Corp. and Costco Wholesale Corp.

Mall-based specialty retailers also may see some positive surprises. The improved results at the discount Old Navy chain likely led to better-than-expected sales at its parent, No. 1 U.S. clothing chain Gap Inc., which may raise its third-quarter outlook, analysts said.

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