UPDATE: Retailers Show Softness In December Same-Store Sales
January 06 2011 - 10:30AM
Dow Jones News
Retailers appear to have overestimated the spending momentum of
consumers and are delivering December sales numbers that show the
poor economy still has the upper hand.
From discounter Target Corp. (TGT) to department store Macy's
Inc. (M) and teen retailer Aeropostale Inc. (ARO), same-store sales
figures for December, retailers' biggest sales month of the year,
are poor.
Target Chief Executive Gregg Steinhafel said "lower-margin items
drove a higher portion of sales than expected." Steinhafel added
that sales of some key gift items shifted earlier into the holiday
season, presumably in November, which ate into last month's
sales.
Macy's, despite missing analysts' estimates for the first time
in more than a year, put up a good front, saying it met its own
"high expectations" and reiterated its guidance, although not
lifting it as it had after posting strong November same-store
sales.
Fellow department store J.C. Penney Co. (JCP) was among few
department stores to exceed expectations, posting 3.7% same-store
sales growth when 3.3% was projected.
Luxury continued its strong comeback, with Saks Inc. (SKS)
posting 11.8% comparable-store sales growth, when 3.9% was
projected. Nordstrom Inc. (JWN), also on the high end, reported a
8.4% increase, ahead of 3.4% expectations.
Abercrombie & Fitch Co. (ANF), was a standout in the teen
group, with its heavy discounting taking customers away from rivals
including Aeropostale Inc. (ARO) and American Eagle Outfitters Inc.
(AEO), which both missed analysts' projections.
Given the soft leaning of most retailers' numbers, December's
showing may not bode well for the new year. "These numbers say the
consumer is going to remain cautious and be very conscious about
price increase," said Mark Montagna, retail analyst at Avondale
Partners
The assessment comes at a time that retailers are facing
increased costs for cotton and other raw materials, a new
phenomenon for them after a couple of decades of stable or even
lower prices. Consumers and retailers are also expected to be hit
with large increases in gasoline prices. "Basically, the entire
supply chain cost is rising," Montagna said.
Retailers came in a little shy of expectations, posting a
collective 3.1% increase. While sales appeared stronger at the
beginning and end of the month, the middle saw a lull. All told,
the 28 retailers followed by Thomson Reuters were expected to
report that their December same-store sales rose 3.4% after a 5.6%
gain in November. Sandwiched between was the recession and
lingering economic weakness in which December comparable-store
sales dropped 2.5% in 2009, declined 0.7% the prior year and rose
3.2% in 2007.
Retailers may have had a false sense of security after
November's sales proved especially strong. "After a strong start to
the holiday season in November, sales and traffic trends for our
brands were less consistent in December," said Sabrina Simmons, Gap
Inc.'s (GPS) chief financial officer.
The season ended up being promotional many retailers said, as
planned sales early in the season were stepped up as Christmas
approached to capture customers. J.C. Penney said it experienced
more transactions in December, but average prices declined during
the month. Wet Seal cited "an extremely promotional competitive
environment" that prompted it to promote more aggressively than its
initial plans.
Retailers were also contending with massive strong storms in the
West before Christmas and in the East just after the holiday. Some
$1 billion of sales may have been put of because of the blizzard
that hit the East Coast the day after Christmas, mall traffic
monitor ShopperTrak estimates.
There were some success stories, although their comparable-store
sales in a number of cases weren't as strong as they have been in
prior months. Limited Inc. (LTD) reported a 5% rise in same-store
sales, beating expectations for a 4.6% gain. Buckle Inc. (BKE) said
sales at stores open more than a year rose 6.1% in December, when a
4.5% increase was expected.
A number of retailers have reduced their quarterly expectations
as a result of their showing. Wet Seal, women's apparel retailer
Cato Corp. (CATO) and Bebe Stores Inc. (BEBE) have all tempered
their views.
Consumers appear to have come into the holiday season primed. In
December 2009, only 10% planned to spend more on holiday gifts than
the previous year, according to a U.S. spending survey by Discover
Financial Services (DFS). In 2010, the number rose to 14%. Also,
only 57% planned to spend less on holiday gifts during the recent
holiday season, 7 percentage points less than in 2009, Discover
said.
This was the year retailers also had an additional leg up,
having their online operations come into their own. U.S. online
sales for the November through December holiday shopping period
were a record $32.6 billion, up 12% from a year earlier, according
to ComScore Inc. (SCOR), with Cyber Monday, the Monday after
Thanksgiving, seeing more than $1 billion spent, the largest
one-day online sales day ever.
-By Karen Talley, Dow Jones Newswires; 212-416-2196;
karen.talley@dowjones.com
-Catlin Nish contributed to this story.
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