3rd UPDATE: Retailers Miss Modest November Sales Expectations

With three weeks left in the crucial pre-Christmas shopping season, U.S. retailers' November same-store sales broadly missed analysts' muted expectations and confirmed an intense focus by shoppers on discounts and promotions.

The industry as a whole eked out only a slight increase over last year's sharply lower levels. Much of the reported weakness was tied to lower sales earlier in the month, as several chains indicated Black Friday weekend sales provided a month-end lift. Online sales were also a bright spot for many, but not enough to overcome shoppers' reluctance to buy discretionary and full-priced items.

"Consumers are still very, very picky, and they won't shop unless they have a value," said Jharonne Martis, director of consumer research for Thomson Reuters. Retailers, she said, "are going to have to be very smart about how to lure the shopper in without lowering their margins."

Retail stocks were mixed in early trading. Wal-Mart Stores Inc. (WMT), which stopped issuing monthly sales figures earlier this year, fell 0.3% to $54.41 and Target Corp. (TGT) shares decreased 3.4%. Pier 1 Imports Inc. (PIR) and Limited Brands Inc. (LTD), rose on better-than-expected sales.

November's 0.5% increase industrywide, according to Thomson Reuters, follows last year's 7.8% slump as the stock market swooned. Both figures exclude Wal-Mart.

The last forecast from analysts surveyed by Thomson Reuters was for 2.1% growth in November and 0.4% growth in December, but Martis expects December estimates to come down.

The November performance comes after what many viewed as a mixed kickoff to the holiday shopping season, with shoppers on average spending 7.9% less than the Black Friday weekend of 2008, according to the National Retail Federation. In general, lower-priced items were favored, continuing a trend of less-expensive retailers, be they discounters or lower-priced apparel sellers, outperforming other chains in the past year.

Still, Costco Wholesale Corp. (COST) on Thursday reported weakness in November after two months of solid growth, as same-store sales were flat in the U.S. excluding gasoline for the warehouse club. Its shares fell 2.6%.

Smaller rival BJ's Wholesale Club Inc. (BJ), which has been outperforming Costco of late, also reported weaker-than-expected results with its 1% growth. Its stock dropped 4.6%.

But discount-apparel chains TJX Cos. (TJX) and Ross Stores Inc. (ROST) continued their recent strength, with both reporting 8% increases, though TJX's gain was less than forecast by analysts.

Among department stores, Kohl's had a 3.3% climb in same-store sales, topping expectations, while Macy's Inc. (M) and J.C. Penney Co. (JCP) had declines bigger than analysts projected. Shares of Kohl's Corp. (KSS) were flat, while Macy's was down 4.6% and J.C. Penney shares declined 2.9%.

Target Corp. (TGT) reported a bigger-than-anticipated 1.5% drop and said it expects December comps in line with November results. Chairman and Chief Executive Gregg Steinhafel said weakness the first three weeks of November was "substantially offset by better-than-expected sales during our post-Thanksgiving Two-Day sale." Online sales during that period were also "quite strong," Target said.

For the month, apparel and home-related items were among Target's weaker categories, while sales of health care, food, beauty and baby items increased by low- to high-single digits on a percentage basis, the retailer said.

Limited Brands Inc. (LTD) surprised analysts for the second time in three months by posting same-store sales growth--3% in November after a 12% slump last year. A gain posted in September was the first for the Victoria's Secret and Bath & Body Works parent in two years. The company said it saw "record sales" on Black Friday, helping Limited avoid a potential same-store-sales drop for November. It added merchandise margins were "up significantly" in the month.

As it did for November, Limited projected December same-store sales falling by the low- to mid-single digits on a percentage basis. Shares added 1.3%.

Pier 1 Imports, which has been posting improved results this year after a string of loses earlier this decade, said same-store sales for its fiscal third quarter ended Saturday jumped 14% after last year's 18% tumble. President and Chief Executive Alex Smith said the home-furnishings company saw building strength throughout the quarter, "culminating in a very strong Thanksgiving weekend." Its stock jumped 6.4%.

While Gap Inc. (GPS) reported flat results, in line with expectations, teen apparel chain Abercrombie & Fitch Co. (ANF) posted a much bigger-than-expected 17% slide in November same-store sales. And Children's Place Retail Stores Inc. (PLCE) reported a 13% swoon, not the average 1% gain analysts anticipated. Its shares fell 10.8% while Abercrombie dropped 6%.

-By Mary Ellen Lloyd and Kevin Kingsbury, Dow Jones Newswires, 704-948-9145; maryellen.lloyd@dowjones.com

Abercrombie and Fitch (NYSE:ANF)
Historical Stock Chart
From Jun 2024 to Jul 2024