retailers-holidays-sales-were-just-good-enough-to-get-byThe final numbers are in, and strong online sales, picky late shoppers and targeted discounting helped lift December retail sales above last year's totals -- but it won't be enough to put 2009 in the plus column. January's clearance sales won't be much help either; they will be shorter and more thinly stocked this year.%%DynaPub-Enhancement class="enhancement contentType-HTML Content fragmentId-1 payloadId-61603 alignment-right size-small"%% When retailers reported their December sales figures, most showed an increase over 2008, and many boosted their profit margins by a healthy percentage. But the majority also reported year-to-date sales were still running behind the totals for last year. Most retailers' fiscal years run through January, so stores will close their books on Jan. 31, but they make the biggest chunk of their profits in the weeks between Thanksgiving and Christmas.

A tally of top retailers by Thomson Reuters (TRIN) found comparable sales -- for stores open at least a year -- were up 2.9% in December, nearly one percentage point better than expected. Of course, that is an easy comparison to make after December 2008's 3.6% drop, but it was still better than most forecasts, which had called for flat or lower sales.

Many retailers reported stronger sales in the fifth week of holiday shopping -- including a post-holiday bump -- than in the early weeks of December. That late surge of procrastinators helped lift the month's results for many stores.

"The season began slowly, but spending finished on a positive note," said Michael Niemira, chief economist of the International Council of Shopping Centers. In his report, he noted that the December numbers were the best year-over-year increases on a same-store basis since April 2008.

The Unsurprising Winners: Discount Stores

In keeping with shoppers' cautious mood, discount stores were big winners, up 5.3% in December. That figure excludes Wal-Mart Stores (WMT), which doesn't report numbers monthly.

Sears Holdings (SHDL) reported Kmart's comparable sales were up 5.3%, thanks to higher sales of toys, housewares and apparel, but the year's totals are down 0.7% so far. Meanwhile, numbers at Sears stores were down 4.3% in December due to lower sales of hardlines -- appliances and similar big-ticket items -- which were only partly offset by higher sales in the tool and automotive departments.

Target Corp. (TGT) posted comparable sales up 1.8%, better than it expected -- thanks to stronger sales in apparel, electronics and food -- but it's down 2.7% year-to-date. Still, the discount retailer said it did well enough to beat analysts' fourth-quarter earnings expectations of $1.11 per share.

Apparel was also strong, up 4.7% on a same-store basis, but again, shoppers were being careful, seeking out discounts. Retailers have been careful to tighten up inventories this year and avoid markdowns, after being being forced into fire sales last holiday season.

Limited Brands (LTD) for example, moved its semi-annual Victoria's Secret sale from December to start Jan. 2, so only one day fell in its holiday totals. Limited's overall comparable sales for December came in 2% below last year, with a 4% increase at Bath & Body Works offsetting a 6% decrease at Victoria's Secret. But the company increased its earnings guidance for the fourth quarter to 90 cents to 97 cents per share from 71 cents to 86 cents, saying its profit margins are up.

Limited was among the retailers that said they will go into January 2010 with lighter clearance inventory than they did in 2009. Management said the clearance sale at Bath & Body Works will be eight days shorter this year than last, due to better inventory controls this holiday season.

Indeed, most retailers are expecting flat or lower sales in January, given the shorter and lighter post-holiday clearances. Kohl's Corp. (KSS), which was up 4.7% on a comparable basis and shows a relatively flat 0.2% growth for the year to date, said it expects flat comparable sales in January because of thinner clearance racks. Rival J.C. Penney (JCP), which was down 3.8% for the month and 6.5% for the year to date, is projecting a drop of 5% to 8% in comparable sales, for similar reasons.

The Surprise Winners: Department Stores

After years of misery, department stores eked out some improvement this holiday, finally seeing results from changes in merchandising and a focus on online sales. Thomson Reuters' tally showed department stores' comparable sales rose 0.7% on average, better than the 0.3% drop it had forecast.

Macy's (M) reported same-store sales were up 1% in December, but were down 1.5% for the full, nine-week holiday season and are down 5.8% for the year to date. It got a strong assist from online sales, which were up 29.4% for December and 19.3% for the year. Macy's website came into its own this year, showing much stronger sales than its department stores and turning into a profit center of its own.

Rival Nordstrom Inc. (JWN), another retailer that has embraced web sales, also benefited from strong online shopping. Nordstrom's total comparable sales were up 7.8% in December, with online sales up 30.1%. And while its total comparable sales for the year are running 6% below last year's, online sales are up 12.1%. Nordstrom's discount Rack stores were also strong performers, with comparable sales up 5.2% in December and running 2.3% ahead this year over fiscal 2008.

The department store chain -- which had tinkered with merchandising during the recession, bringing down its prices and stocking fewer luxury items -- was encouraged by stronger traffic in December and its first increase in average transaction size this year. Management announced it now expects to beat its earnings estimate of $1.83 to $1.88 per share for the fiscal year ending in January.

On the down side, Saks Inc. (SKS) continues to suffer from the weakness in the luxury market. Its comparable sales rose 9.9% in December, thanks to shifting its designer clearance sale from November, but comparable sales were still down 7.3% for the full holiday season and are down 15.8% for the year-to-date.

"The trend through the holidays is now pretty clear that shoppers are moving toward stronger spending into 2010. But it's also clear that ­some cautiousness will persist and that spending will remain uneven across categories and retailers," said Frank Badillo, senior economist at consultancy Retail Forward. The company's monthly ShopperScape survey of consumer attitudes found households are feeling better about their levels of credit card debt and the value of their homes and investments, but remain worried about their job security and income level, all of which affect spending.

The ICSC's Niemira is forecasting January sales in a range of flat to up 1%, and expects growth will pick up as the year goes on to an annual rate of 3% to 3.5%, the strongest year-over year growth since 4.8% in 2006.

So if the forecasts are to be believed, store sales are finding their level and those reports of retailers building inventories could be a sign of a recovery, but a cautious, modest one.

Increase your money and finance knowledge from home

Forex for Beginners

Learn about trading currencies and foreign exchange transactions

View Course »

Investing in Startups

The lucrative and risky world of startups.

View Course »

Add a Comment

*0 / 3000 Character Maximum