NEW YORK--It doesn't look like the new year will greet retailers
on a welcome note.
Retailers, scheduled to report their critical December
same-store sales on Thursday, will likely show disappointing
results hurt by factors including declining consumer confidence
tied to Washington's fiscal-cliff uncertainty, analysts said
Monday.
Consensus estimates for December, according to Retail Metrics
data, fell another 0.2 of a percentage point on Monday for both
same-store sales and same-store sales excluding drug stores--to
increases of 1.9% and 3.7%, respectively. Retail Metrics noted that
the average analyst estimate has declined by 0.6 of a percentage
point from the start of the month.
"This is significant downward move to sales estimates for the
most important month of the year," said Retail Metrics president
Ken Perkins, noting that December alone represents about one-fifth
of total annual sales.
The gain would mark retailers' worst December performance since
2008, Mr. Perkins told MarketWatch.
With two extra days between Thanksgiving and Christmas this
year, retailers, without must-have items to entice shoppers, also
experienced a big lull following consumers' initial fervor seen
over Thanksgiving weekend as more procrastinated in their holiday
shopping, analysts said.
Meanwhile, a bout of colder weather in late December didn't look
to salvage higher-than-average temperatures seen earlier in the
month that hurt demand for heavy coats and other cold-weather
merchandise. December has shaped up to be the second-warmest in
more than 21 years for the U.S. as a whole, according to Weather
Trends International.
Consumers' mood to visit malls and shop also was hurt by the
mass shooting at a Newtown, Conn., school, they said.
The dampened mood is cutting into estimates across the discount,
department-store and apparel segments. Among individual retailers,
analysts have lowered consensus estimates on Gap Inc. (GPS), Kohl's
Corp. (KSS) and Macy's Inc. (M) as well as Limited Brands Inc.
(LTD) , the parent of Victoria's Secret and T.J. Maxx parent TJX
Cos. (TJX), Retail Metrics data showed.
"Short of plan"
Retailers had hoped they would make up business in December
after Hurricane Sandy, the superstorm that devastated parts of the
Northeast, hurt their November receipts.
"We believe December same-store sales trends fell short of
plan," said UBS analyst Michael Binetti, who cut estimates on
Nordstrom Inc. (JWN) besides on Macy's and Kohl's.
A late-month "sales rally wasn't sufficient to hit planned sales
targets. Weather-sensitive Kohl's has the most [sales] downside.
Macy's strong e-commerce business and aggressive extended hours
pre-Christmas strategy helped fight sluggish mall traffic in the
month," Mr. Binetti wrote.
Analysts also cut their fourth-quarter sales view on struggling
J.C. Penney Co. (JCP), which doesn't report monthly sales, to a
24.9% drop following a 26% decline in the third quarter, Retail
Metrics data showed.
Meanwhile, electronics retailer Best Buy Co. (BBY), facing the
possibility of a buyout pending its holiday-sales results, was
expected to report a 3% fourth-quarter drop, Retail Metrics data
showed.
Still, while sales may have suffered a setback, analysts said
better inventory control and mostly planned promotions so far in
the season, coupled with lower cotton costs, are likely going to
keep retailers' profit margin mostly intact.
It is a "ho-hum holiday, but margin cushion [is] to allow most
to meet [per-share profit] expectations," said UBS analyst Roxanne
Meyer, adding chains such as Abercrombie & Fitch Co. (ANF) and
Urban Outfitters Inc. (URBN) were "notably less promotional" in
December.
She cut her sales estimates on Aeropostale Inc. (ARO), Gap and
Victoria's Secret.
Analysts have also cut their estimates on discounter Target
Corp. (TGT), after the company's much-touted designer collection in
partnership with Neiman Marcus failed to generate expected demand.
Target marked the collection off by 50% just about three weeks
after the launch at the start of December.
Analysts also said Target's P-Fresh expanded food assortment and
5% discount given on its Target card purchases provided less of a
lift during the holiday period because spending is more geared
toward non-essential items during the holidays.
"We expect [Target] sales remained sluggish in aggregate over
the holidays amidst a competitive backdrop," said Robert W. Baird
& Co. analyst Peter Benedict.
On the other hand, larger rival Wal-Mart Stores Inc. (WMT).
which doesn't report monthly sales, is regarded as a holiday
winner.
"We believe Walmart had a strong holiday season," said Gilford
Securities analyst Bernard Sosnick. The company "had its best Black
Friday and that layaways were greater than a year ago.
"Food and consumables sales benefited from sharper
pricing...apparel departments had a good sell-through across much
of the U.S."
Andria Cheng; 415-439-6400; AskNewswires@dowjones.com
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