In what will probably be a prelude to holiday results, the U.S. retail sector had the worst October for sales in 12 years. While some of that is related to the macroeconomic picture, including housing, credit and oil price concerns, the warm weather also played a big role, as people didn't buy winter clothes the way they usually do at this time of the year.
The results, as measured by same-store sales, increased by only 1.6 percent, with very few big retailers meeting analysts' estimates. Again, that's the worst performance in 12 years for the retail industry.
With the unseasonably warm weather, retailers were forced to cut prices which put pressure on their profits.
The slowing sales will now force retailers to discount heavily during the holiday season to get people to come into their stores. Wal-Mart (WMT) has already had discounts in place usually reserved for "Black Friday." Projections are that this may be the slowest holiday shopping season in five years.
To give an idea of how widespread the slow sales are, historically, about 43 percent of retailers on average miss Wall Street expectations, this quarter 70 percent missed expectations, said Retail Metrics.
Another thing different this quarter, is the usually strong performing luxury retail category also didn't meat expectations, to show how weak things are at this time.
Same-store sales for November and December are estimated to increase by about 2.5 percent. If you include January, that could rise to 2.9 percent because of gift card purchases, according to the ICSC. The National Retail Federation is a little more optimistic, projecting sales to grow by 4 percent. Still lower than it has been in several years.
All of this could bring weak earnings in at the end of the fourth quarter, causing a lot of the retailers to be hit hard on their stock prices.
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