With three weeks left in the crucial pre-Christmas shopping
season, the game of chicken between shoppers focused on discounts
and retailers trying to protect profit margins is intensifying.
U.S. retailers' November same-store sales broadly missed
analysts' muted expectations, and 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 both of those positives weren't enough to offset
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."
Shoppers expect everything to be on sale--and at least 20% to
25% off, according to retail consultancy WSL Strategic Retail.
"Some categories require even more to get shoppers buying: 32% for
electronics; 34% for fashion and 34% for home," the firm said in a
note Thursday.
"It doesn't matter that the retailers keep talking about we've
got less inventory and you'd better buy it now," said WSL Chief
Executive Wendy Liebmann. "People say, 'OK, so? I'll wait.' It's
good for the retailers in the end to have less inventory and
markdowns, but at the same time, scarcity will not necessarily
drive the sale."
Retail stocks were mixed in recent 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% same-store sales increase industrywide,
according to Thomson Reuters, follows the year-ago period'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 for the fourth quarter,
but Martis expects fourth-quarter estimates to come down.
But with consumers behind on their shopping compared with last
year, the spending catch-up will come in December, said Michael P.
Niemira, chief economist and director of research for the
International Council of Shopping Centers Inc. The group reiterated
its forecast of 2% to 3% growth in December sales and a 1% increase
in holiday chain-store sales.
Child and teen apparel retailers posted the biggest November
disappointments, hurt by weak traffic that some analysts said was
tied to unseasonably warm weather. But other apparel retailers,
notably Limited and Ross Stores Inc. (ROST), posted
stronger-than-anticipated sales.
Kohl's Corp. (KSS) and TJX Cos. (TJX) said home goods were among
their strongest sellers--good news for the beleaguered product
category.
Department store Macy's Inc. (M), which posted a
worse-than-expected 6% sales decline, cited weakness in coats,
sweaters and other winter merchandise.
"We're going to be very disappointed with apparel sales through
the rest of the holiday season unless the weather snaps," said
Randy Allen, a former Kmart Corp. and Deloitte Consulting executive
and now associate dean for Cornell University's Johnson Graduate
School of Management. Without a cold snap in the next few days, she
expects significant discounting in apparel will be needed to spur
sales, despite retailers' lean inventories. "Consumers just aren't
going to buy if the weather's not cold unless there's a good
deal."
The Carolinas through the Northeast could see cold rain and the
potential for snow in the next week, and the Upper Midwest and
Plains areas could also see snow and ice, said Evan Gold, senior
vice president of client services at Planalytics, a weather-focused
retail consultancy with clients such as Levi Strauss, Lands' End
and Payless ShoeSource.
December is expected to be warmer than last year across much of
the U.S., but it will cool down from recent trends, and on the
heels of the warmest November in eight years, shoppers will be
reminded that winter is arriving, Gold said.
The retailers' 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 3%.
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 2.1%.
But discount-apparel chains TJX and Ross Stores continued their
recent strength, with both reporting 8% increases, though TJX's
gain was less than forecast by analysts.
Among department stores, Kohl's 3.3% increase topped
expectations, while Macy's and J.C. Penney Co. (JCP) posted lower
sales.
Target reported a bigger-than-anticipated 1.5% drop and said it
expects December comps in line with November results.
Gap Inc. (GPS) reported flat results, in line with expectations
but surpassing others in the specialty apparel group as promotions
such as a buy-one-get-one-free sweater deal connected with
shoppers, Wall Street Strategies analyst Brian Sozzi said.
Teen apparel chain Abercrombie & Fitch Co. (ANF) posted a
much bigger-than-expected 17% slide in November same-store sales,
with its Hollister brand showing the weakest trends.
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 7.2%.
(Kevin Kingsbury contributed to this report.)
-By Mary Ellen Lloyd, Dow Jones Newswires, 704-948-9145;
maryellen.lloyd@dowjones.com
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