December was a mixed bag for retailers

Consumers were picky about their shopping habits this recent holiday season causing some retailers to pause for concern while others raked in higher-than-expected profits.

U.S. chain store sales (excluding drug stores) posted a solid 4.5% gain in December following a weak 1.7% gain in November, according to the International Council of Shopping Centers.

The December expectation was in line with the trade group’s estimate of 4% to 4.5% and made for a November-December holiday season sales gain of 3.1% excluding drug stores. Only a small group of stores representing about 13% of the $2.4 trillion U.S. retail industry report monthly revenue, but the data offers a snapshot of consumer spending.                  

"That last-minute shopping, coupled with post-Christmas bargain hunting and early gift-card redemption helped propel sales at the end of the month," said Michael Niemira, ICSC's chief economist.  
               
The group’s forecast released in September called for a 3% season gain for the two months and although the profile was more uneven between months, between weeks and between retailers, the overall aggregate performance was largely as expected.

The retail landscape was sharply divided between winner and losers among the 20 chains reporting. Wal-Mart does not report monthly sales but in some way does compete directly with many of those retailers that do give monthly sales numbers.

WINNING HAND
Costco came up big reporting a 9% increase in same-store sales for December, The wholesale club giant rang up $34.42 billion in sales, up from $31.68 million in the year-ago period.

Discount retailers like TJX and Ross Stores also did better than most, reporting comparable sales up 6% thanks to heavy holiday traffic among bargain hunters shopping for top brands throughout the month.

TJX said sales for the five-week period ended Dec. 29 were $3.6 billion, up 10% over the $3.3 billion achieved during the same time in 2011.

Ross Stores reported sales rose 11% to $1.276 billion for the five weeks ended Dec. 29, up from $1.149 billion in sales last year.

Both retailers raised their fourth-quarter earnings forecasts, because of the strong holiday showing.

Macy’s Inc. also had a respectable holiday showing with total sales of $5.102 billion, an increase of 3.6% year-over-year. On a same-store basis, Macy’s sales were up 4.1% in December compared to the prior year.

“Last month was our fourth consecutive December with same-store sales growth," said Terry Lundgren, chairman of Macy’s. He said the company overcame significant headwinds from uncertain economic news and the lingering effects of Hurricane Sandy.

“All said, we are proud of our accomplishments in driving growth this holiday season and we believe we continued to gain market share. In particular, we are pleased with the significant progress we made this holiday season in implementing our Omnichannel initiatives through a period of high sales volume. Our new process for satisfying store and online orders through both our online fulfillment centers and fulfillment stores led us to make better use of our inventories and drive sales that otherwise would have been lost when we ran out of stock locally in certain items,” Lundgren said.    

BELOW EXPECTATIONS
Other retailers such as Kohl’s, Family Dollar, Barnes and Noble and Target performed below expectations during the recent holiday season.

“December sales were lower than planned. Additionally, sales came late in the holiday shopping season and, as a result, were at deeper discounts than planned. We are taking the necessary markdowns in the fourth quarter to manage our inventory as we transition into the Spring season,” said Kevin Mansell, Kohl’s chairman and CEO.

The mid-range retailer reported total sales in December grew 4%, while comparable store sales increased 3.4% from the prior-year period. As a result of its quarter-to-date performance, the Kohl’s lowered its earnings guidance by roughly 40 cents a share for the fourth quarter and full year.
   
Target Corp. also reported a lackluster holiday season, with total sales of $10,214 million, up of 0.8 % from the prior year. On this same basis, December comparable-store sales were essentially flat.

“December sales were slightly below our expectations, as strong results late in the month did not completely offset softness in the first three weeks," said Gregg Steinhafel, chairman and CEO of Target.

Family Dollar reported its gross margins are under pressure and fears its customers’ budgets will be squeezed tighter in 2013 with higher payroll taxes which takes $1,000 a year away from families earning $50,000.

“The holiday selling season proved to be more challenging than we expected as customers faced increasing financial uncertainty. Comparable stores sales for December increased about 2.5%, driven primarily by strong, double-digit sales of Consumables. Discretionary categories continued to be pressured, reflecting ongoing consumer caution,” said CEO Howard Levine. “Despite the ongoing economic uncertainty, we expect that the investments we have made in traffic-driving categories will continue to build sales momentum through January and February, as customers focus even more on basic needs.” 

Speciality retailers like Barnes & Noble and Limited Brands, parent of VIctoria’s Secret, had rougher holiday seasons.

Disappointing electronic tablet NOOK sales caused a big miss for Barnes & Noble, prompting a 8.2% drop in same-store sales during December.

The book retailer posted revenues of $1.2 billion, falling 10.9% from the prior year. Core comparable store sales, which exclude sales of NOOK products, decreased 3.1% as compared to the prior year due to lower bookstore traffic.

The company said sales of NOOK products in the retail segment declined during the holiday period due to lower unit volume and average selling prices.

"NOOK device sales got off to a good start over the Black Friday period, but then fell short of expectations for the balance of holiday. We are examining the root cause of the December shortfall in sales, and will adjust our strategies accordingly going forward," said CEO William Lynch.

Limited Brands reported a comparable store sales increase of 3% for the five weeks ended Dec. 29. This was under expectations for what is typically a big holiday for the owner of Victoria’s Secret chain. Limited said its merchandise profit margin came in below its own forecast.

The company reported net sales of $1.947 billion for the five weeks ended Dec. 29, compared to sales of $1.868 billion last year.