U.S. retailers reported a strong start to the holiday season by
announcing higher sales in November, which were bolstered by
aggressive discounting that started early in the month.
According to 27 retailers tracked by Thomson Reuters, sales at
stores open more than a year rose 6% in November, above the
estimated growth of 3.6% and the year-ago gain of 0.6%. Many
retailers started the holiday season early in November, blitzing
shoppers with promotions because of concerns that the
still-uncertain economy would hold them back.
"Retailers' game plan was aggressive promotions throughout the
month," said John Long, retail strategist at Kurt Salmon
Associates. "The results we are seeing are not solely the
contribution of Black Friday sales." Black Friday is the retail
nickname for the day after the U.S. Thanksgiving holiday.
The strong early start has prompted some to wonder if consumers
will continue to spend throughout the holiday season. The National
Retail Federation projects holiday sales will rise 2.3% this year
after a 0.4% gain in 2009 and a 3.9% drop in 2008.
"You can't take what happened in November and say this is what's
going to happen for the season," said Paula Rosenblum, managing
partner at Retail Systems Research, a retail advisory firm.
"Consumers are experiencing frugality fatigue, so they went out
there and shopped for the bargains. The real test is whether they
will continue to spend."
Retail stocks, as a group, continued to rise Friday. The S&P
500 Retail Index, which hit a new year high Thursday, recently
gained 1.3% to 505.79. Abercrombie & Fitch Co. (ANF), Dillard's
Inc. (DDS) and J.C. Penney Co. (JCP) were among the biggest stock
gainers, while Aeropostale Inc. (ARO) saw the sharpest decline.
Department stores had a strong November, with Macy's Inc. (M)
reporting same-store sales up 6.1%, when a 5% increase was
expected; it lifted its earnings guidance for the fourth quarter.
While the Black Friday weekend was "particularly strong," sales for
the entire month exceeded expectations, Chief Executive Terry
Lundgren said.
To keep holiday momentum going, Macy's has "a compelling
promotional calendar" for the rest of the month, Lundgren said.
J.C. Penney reported a 9.2% gain in same-store sales, well ahead
of expectations for a 3.1% rise. J.C. Penney was among retailers
that noted they saw considerable "self-buying," as shoppers used
some discretionary dollars for themselves.
Kohl's Corp. (KSS) saw same-store sales grow 6.1%, exceeding
analysts' projections for a 2.8% rise. The retailer indicated it
wasn't as promotional as last year, having raised average prices by
low single-digit percentages. Kohl's said it sold fewer items, but
the average customer transaction was still flat from a year
ago.
Kohl's also expects its inventory levels to be up in the low
single-digits on a percentage basis at the end of the fourth
quarter. Retailers are trying hard this year to balance merchandise
with sales to avoid being stuck with a glut of inventory when the
holiday season ends, which has happened in the recent past.
A surprise in the luxury group--given that this sector has been
making a strong comeback--was Saks Inc. (SKS), which reported a
5.3% gain in same-store sales, below expectations for a 9.5%
increase. The disappointing results came as Saks engaged in
promotions during the month.
At mass merchant Target Corp. (TGT), "November sales were
better-than-expected, driven by very strong traffic throughout the
month," said CEO Gregg Steinhafel. With help from its 5% discount
program for purchases on its credit, debit or Visa cards, the
retailer is "well-positioned" for December, Steinhafel said.
Limited Brands Inc. (LTD), operator of Victoria's Secret and
Bath & Body Works, said same-store sales rose 10%, when
analysts projected a 4% rise. Limited also took a step away from
the pack, saying it plans to reduce promotions, amid what it
recognizes is a very competitive environment.
The world's largest retailer, Wal-Mart Stores Inc. (WMT),
doesn't report sales on a monthly basis.
Teen retailers were at the extremes of the stores reporting
same-store sales, showing the fickleness of the main demographic
that shop at those chains as well as the power of aggressive
discounts.
Abercrombie's same-store sales rose 22%, well above the average
analyst estimate of 6.8% on Thomson Reuters. Abercrombie's
aggressive promotions likely weighed on low-price teen retailer
Aeropostale, which surprised Wall Street by reporting a 1% drop in
same-store sales, when analysts were expecting growth of 0.9%.
Aeropostale added that holiday sales trends "decelerated
significantly" after Black Friday.
Fellow teen retailer Zumiez Inc. (ZUMZ) said it didn't
experience the same post-Black Friday sales deceleration as
Aeropostale. Zumiez's same-store sales rose 20.7%, above the
Street's estimate of 12.6%.
Hot Topic Inc. (HOTT) reported the worst same-store sales figure
among retailers, based in part on tough year-ago comparisons from
sales of products related to the movie "Twilight." However, the
company's 2.1% comparable-store sales decline was still narrower
than the Thomson Reuters' estimate of a 4.6% decline.
The reports Thursday generally mirrored the strong industry
numbers that came in for the Black Friday weekend, showing sales
and customer traffic rose.
-By Karen Talley, Dow Jones Newswires; 212-416-2196;
karen.talley@dowjones.com
-Caitlin Nish contributed to this article.
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