By Karen Talley and Anna Prior
Cautious U.S. consumers restrained their spending in December,
making for a generally mixed holiday season for retailers at what
is usually their busiest time of the year.
A reluctance to spend as the fiscal cliff loomed held purchasing
in check, compounded by Hurricane Sandy in the Northeast and a lack
of the kind of cold weather that generally spurs buying. Among the
better performers last month were Costco Wholesale Corp. (COST),
Gap Inc. (GPS) and Macy's Inc. (M), while Target Corp. (TGT),
Limited Brands Inc. (LTD) and some apparel retailers were weak.
"It was a very complicated month, with all sorts of events that
threatened fragile expectations," said Barbara Kahn, marketing
professor at the University of Pennsylvania's Wharton School.
"Online was a saving grace for some of the retailers as people
shift in that direction."
The 17 retailers tracked by Thomson Reuters are expected to
report 3.3% growth in December same-store sales, or stores open at
least a year. The figure compares with 4.2% a year ago.
Target reported flat comparable-store sales, when a 0.8% rise
was expected, but said it sees fourth-quarter earnings meeting or
somewhat exceeding the low end of its expectations.
"December sales were slightly below our expectations, as strong
results late in the month did not completely offset softness in the
first three weeks," Chief Executive Gregg Steinhafel said.
Macy's had a comparatively good month as same-store sales rose
4.1% in December, just passing expectations for 4%.
"Last month was our fourth consecutive December with same-store
sales growth, which is indicative of the sustainability of our key
business strategies," Chief Executive Terry Lundgren said. "While
the rate of growth was somewhat less than we had expected in the
first two months of the fourth quarter, it came amid some
significant headwinds from uncertain economic news and the
lingering effects of Hurricane Sandy."
Macy's said it benefited from its "omnichannel" strategy that
relies on both stores and online avenues.
Gap reported that December same-store sales grew 5%, while
analysts expected 3.5%. All three North American brands--Gap,
Banana Republic and Old Navy--posted comparable sales growth, while
international reported a 6% decline. Gap also announced it approved
a new $1 billion share repurchase program.
Costco remained a standout, posting a gain of 8% in U.S.
same-store sales minus gasoline; analysts expected a 5.3% rise. The
mass merchant said its sales for the month benefited by about 2%
from an extra selling day because of the timing of the New Year's
holiday.
Best performing areas for Costco included Texas, Southeast and
Midwest. Costco's softlines category posted some of the strongest
comparable sales growth--rising in the low to mid-teens range--as
small appliances, housewares and women's apparel did well. Stores
also were busier, with comparable traffic frequency posting a
slightly more than 5% gain.
Limited Brands, operator of Victoria's Secret and Bath &
Body Works, reported a rare miss, posting a same-store sales
increase of 3%, when 4.5% was expected. Flat results at Victoria's
Secret more than offset the strong 7% growth at Bath & Body
Works. While the company said merchandise margins rose from a year
earlier, the increase was "below expectations."
Apparel retailer Cato Corp. (CATO) posted a 7% drop in
same-store sales when a 1% decline was projected. "December
same-store sales results were well below expectations and our
year-to-date trend," Chief Executive John Cato said, as the company
lowered its fourth-quarter guidance.
Teen retailer Wet Seal (WTSLA) posted a 9.7% decline in
same-store sales when a 5% decline was expected and said its
fourth-quarter loss will be at or near the low end of its initial
projection. The disappointing December showing was driven mainly by
lower-than-expected transactions throughout the month, the company
said.
December same-store sales at fellow teen retailer Buckle Inc.
(BKE) grew 1% compared to the year-ago period, while a decrease of
0.3% was expected. Overall, shoppers appeared to spend more, with
the average transaction value rising about 5.5%, the company
said.
Zumiez Inc. (ZUMZ), a teen retailer with a focus on action
sports apparel, equipment, and accessories, posted a 1% decrease in
December same-store sales, when a 3.6% decline was expected.
The so-called fiscal cliff loomed large in December, promising a
package of spending cuts and tax increases for the new year if
lawmakers could not work out an alternative. U.S. policy-makers
reached a compromise in their budget dispute and struck a deal to
avoid the worst of the fiscal cliff earlier this week.
Write to Karen Talley at karen.talley@dowjones.com
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