October sales mostly tepid

New York City More than half of U.S. retail chains posted October sales that fell short of Wall Street's heightened expectations, raising concern about the strength of the recovery for the holiday season. Total October same-store sales rose 1.8%, below an estimate for a 2% gain, according to Thomson Reuters data. Still, it marked the strongest showing since June 2008, when sales rose 1.9%.

"It looks like we're on track for kind of a mediocre season right now based upon October,” said Brean Murray, Carret & Co. analyst Eric Beder, in a Reuters report.

Fifty-two percent of retailers tracked by Thomson came in below expectations, while 44% beat forecasts. Despite failing to meet expectations, however, some chains, including Kohl’s, raised their third-quarter guidance.

The results were mixed across the board. Extreme-value chains such as Dollar Tree, and off-pricers such as Ross Stores continued to draw shoppers. Department store chains and teen apparel retailers generally disappointed investor expectations, while such disparate companies as Gap, Saks and Nordstrom performed better than expected as consumers return to spending selectively.

"The improvement in the stock market has had a significant impact on the affluent shopper's willingness to spend -- as the luxury market has shown its first positive reading since May 2008," Michael P. Niemira, chief economist at the International Council of Shopping Centers, said in a statement.

Industry holiday forecasts range from a slight decline for retail sales to a slight increase. Many analysts are taking the position that holiday sales will be more about earnings growth than top-line growth as cost controls and tight controls on inventory help protect profits.

In one of the most bullish predictions, the International Council of Shopping Centers has forecast holiday sales to rise about 1% to 2% this year.

"ICSC Research thinks the holiday spending performance will be better than these pre-season consumer expectations, which is often the case following business cycle turning points in the economy," said Michael Niemira, ICSC's director of research and chief economist, in a statement.

However, America's Research Group founder Britt Beemer said total retail sales will most likely fall 2.9% during the season as a whole, according to a forecast issued on Thursday.