UPDATE: Retailers' Sept Same-Store Sales Top Estimates

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Retailers posted higher-than-expected September same-store sales, even as analysts raised their estimates as the month came to a close, with the outperformance potentially enough to end a year-long streak of falling sales.

Victoria's Secret parent Limited Inc. (LTD) was among the upside surprises, reporting its first same-store-sales increase since August 2007. Target Corp. (TGT) reported a 1.7% drop, meeting estimates, but the company was among the companies on Thursday projecting fiscal third-quarter earnings at or above expectations. Others included Kohl's Corp. (KSS) and J.C. Penney Co. (JCP).

The results and resulting optimism sent shares of many retailers higher in premarket trading. Retailers have been suffering for more than a year as consumers have continued to be less free with their spending. But starting in September, comparisons with year-earlier results became notably easier, increasing the near-term likelihood of year-over-year growth gains.

If September ends up in the red, it would be the first time this decade that the same month had two straight years of same-store sales decline. An overall fall of about 1% was expected by analysts, the smallest decline this year, though Labor Day falling later on the calendar in 2009 helped last month's results.

Wall Street Strategies retail analyst Brian Sozzi said the calendar shift, combined with "conducive weather for fall apparel and accessories purchases, and dare I say modest interest in discretionary buying in the West, will be the major themes when all is said and done."

But while growth wouldn't signal the troubles are over, there are reasons to be optimistic. Walgreen Co. (WAG) last week reported higher nonpharmacy sales, with results handily topping analysts' estimates, as expectations for September industrywide improved as the month finished up. Family Dollar Inc. (FDO) on Wednesday forecast 5% same-store-sales growth for the month.

Discounters had been among the best performers, but both drug stores and apparel outlets were expected to outperform in September. That is partially due to the effects of slumping gasoline prices and currency changes on BJ's Wholesale Club Inc. (BJ) and larger rival Costco Wholesale Corp. (COST). BJ's on Thursday posted a 5.5% gain excluding gasoline sales, another month of outpacing peers but below analysts' expectations. Costco on Wednesday reported a 3% rise on that basis in the U.S., double analysts' expectations.

Department stores also showed improved performance, with Macy's Inc. (M) posting an 2.3% drop - half of what analysts anticipated - while struggling smaller peer Dillard's Inc. (DDS) also had a narrower-than-anticipated decline. J.C. Penney's 1.4% drop also was less than expected, while Kohl's reported a 5.5% increase, not the flat results analysts forecast.

Off-price apparel sellers TJX Cos. (TJX) and Ross Stores Inc. (ROST) have been posting some of the best results of late, and they had growth of 7% and 8%, respectively, again topping expectations. Both also boosted their quarterly profit views. Their projected results were slated to help the apparel group post flat same-store sales, according to analysts surveyed by Thomson Reuters. That forecast was much better than the figures the segment has reported for most of the past several years.

Gap Inc. (GPS) posted an in-line 1% drop. Its long-struggling Old Navy chain reported surprise growth in August and posted a stronger-than-expected 13% jump for September - the biggest gain in 5 1/2 years. The company added merchandise margins for the month were "significantly" above year-earlier levels. Teen-apparel chains, especially Abercrombie & Fitch Co. (ANF), were expected to be the weakest performers by sector, though many topped analysts' expectations. That includes ailing Abercrombie, which posted an 18% same-store-sales slump for September. The company has recorded big declines for months as price-conscious shoppers instead go to cheaper rivals like Aeropostale Inc. (ARO). It had a 19% surge, prompting the company to increase its fiscal third-quarter profit target. American Eagle Outfitters Inc. (AEO) also projected earnings at or above its prior forecast. Wal-Mart Stores Inc. (WMT). It stopped reporting monthly sales data in May.

-By Kevin Kingsbury, Dow Jones Newswires; 212-416-2354; [e-mail]