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Will Sandy end retail gains?

Analysts worry stores’ strong sales in October, including

Analysts worry stores’ strong sales in October, including storm-related items, will mean holiday shoppers will have less to spend. Above, a clothing store at The Avenues Mall in Jacksonville, Fla. (Sept. 6, 2012) Photo Credit: AP

Americans spent briskly in October before superstorm Sandy hit the Northeast on the tail end of the month.

But the question is whether they're still willing to buy an iPhone for Christmas if they plunked down hundreds on a generator for Sandy?

Twenty-one retailers from club operator Costco to department store Macy's reported that sales in October through last Saturday were up 5 percent compared with the year-ago period, according to the International Council of Shopping Centers. That beat the trade group's estimated growth of 3.5 percent to 4.5 percent.

Results were not hurt by the storm because it hit the East Coast on Monday, two days after the end of the period for which retailers were reporting sales.

But analysts worry that the strong sales in October could spell trouble for the upcoming holiday shopping season in November and December, a time when many retailers make up to 40 percent of their annual revenue. They fear that many Americans in some of the nation's biggest cities who bought generators, bottled water and other emergency and cleanup supplies before and after the storm will be less inclined to spend over the holidays.

At a time when Americans already are dealing with a slow economic recovery and uncertainties related to the presidential election on Tuesday, Sandy just gives some of them another reason to cut their spending.

Few retailers offered details yesterday on how their sales were affected by Sandy. But the storm, which for days disrupted business activity from North Carolina to Maine and caused stores to close due to power outages, flooding and other issues, is expected to cost retailers billions in lost sales.

October's sales reports include only a handful of retailers that represent about 13 percent of the $2.4-trillion U.S. retail industry. The monthly reports are based on revenue at stores opened at least a year.

Some stores that didn't report sales include home improvement chains like The Home Depot, and the world's biggest retailer, Wal-Mart Stores Inc.

So far, the effects of Sandy mostly are expected to be a wash: Home improvement chains and food stores are expected to benefit, while department stores, clothing retailers and others that sell discretionary items likely will suffer.With many closed stores just starting to reopen, analysts said that the full effects of the storm could spill over into November.

Burt Flickinger III of retail consultancy Strategic Resource Group, estimates that retailers, excluding restaurants, could lose at least $25 billion in sales during the week of the storm. He also downgraded his projection for holiday sales because of the storm, forecasting that they will rise 2.1 percent over last year instead of the 3.2 percent that he had originally predicted.

"People are going to be focused on getting their life back in order --and the holidays could be secondary," said Laura Gurski, a partner and global head of A.T. Kearney's retail practice.


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