Transcripts

Back-to-School Sales Worry Retailers for the Holidays

SUSIE GHARIB: More signs today that American consumers are feeling the financial squeeze from slumping home prices and high gas prices. The nation's major retailers reported weaker than expected September sales, prompting some to warn that their quarterly earnings will also be disappointing. As Erika Miller reports, the poor performance is also raising worries about consumer spending during the crucial holiday season.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Clothing stores catering to children and teens typically register sharp increases in sales in September, but not this year. Many chains, including Abercrombie and Fitch, American Eagle and Children's Place posted disappointing results. Other retailers, like Macy's, JC Penney, Nordstrom, Gap and Target, also fell short of expectations. Retail analyst Richard Jaffe says that trend does not bode well for the all-important holiday season.

RICHARD JAFFE, SPECIALTY RETAIL ANALYST, STIFEL NICOLAUS: If you don't sell enough in September, you end up with more product left over from the third quarter to carry into the fourth quarter. So, your back-to- school fashions are now trying to be sold during the holiday season and that's not good.

MILLER: Most retailers blamed unseasonably warm weather for crimping fall clothing sales. Analysts say high gasoline prices, the weak housing market and credit crunch are making consumers more frugal. Experts also point the finger at uninspiring fashions.

JAFFE: Even in tough times, if it's something you really want, you'll buy it. And in a very depressed economy, that want can make a real difference in your attitude. If you're able - if you're forced to cut back on a lot of larger ticket merchandise purchases, the apparel can be a source of comfort. And we actually in down economies, have seen apparel sales improve.

MILLER: Softness in September prompted many retailers, including Nordstrom, Limited Brands, American Eagle and Target to lower their earnings guidance today. But Wal-Mart bucked the trend, boosting its profit outlook for the third quarter. Bear Stearns analyst Christine Augustine, whose firm has done business with Wal-Mart over the past year, says the company is successfully reducing costs.

CHRISTINE AUGUSTINE, RETAIL ANALYST, BEAR STEARNS: What it tells me is that they have really tightened up on the expenses. And it's not just the store scheduling system. It's expenses at the corporate level. It's expenses at the operating level. They're really looking hard at everything. Everything is under scrutiny.

MILLER: After September's weak results, analysts are even more convinced that holiday sales will be disappointing. Many are predicting gains of just 3 or 4 percent for the industry, the slowest growth in five years. Erika Miller, NIGHTLY BUSINESS REPORT, New York.